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Check out the new article: From Novice to Expert: Statistical Validation of Supply and Demand Zones.
Today, we uncover the often overlooked statistical foundation behind supply and demand trading strategies. By combining MQL5 with Python through a Jupyter Notebook workflow, we conduct a structured, data-driven investigation aimed at transforming visual market assumptions into measurable insights. This article covers the complete research process, including data collection, Python-based statistical analysis, algorithm design, testing, and final conclusions. To explore the methodology and findings in detail, read the full article.
Through synthesis of trading literature and extensive personal chart review, the anatomy of a classic zone can be distilled:
Supply Zone: An area where selling pressure overwhelms buying interest. Visually, it is identified by a consolidation base (a series of candles with overlapping ranges) followed by a strong bearish impulsive candle that closes below the base's low.
Supply and Demand Concepts
Demand Zone: The bullish inverse, where aggressive buying triggers a bullish impulsive candle closing above a consolidation base's high.
The Impulsive Exit Candle is the critical component. It is the market's signature, confirming the imbalance. In discretionary practice, its "strength" is assessed visually, leading to inconsistency. Therefore, the magnitude of this candle becomes the primary variable for our quantitative research.
Author: Clemence Benjamin