Supply Demand Trading aka Order Blocks Trading
The proper use of SD zones / order blocks
Misconceptions about Supply Demand Zones
I have been using Supply Demand Zones to trade since 2008.
Learning to read where order blocks are located was a life-changing experience in my trading career.
It remains the backbone of how I look at the futures market every single day as a funded prop trader for several prop firms.
Order blocks are areas where you see the large institutional players positions.
Once you understand how to PROPERLY use them, it's literally as if the institutional order book is open before your eyes. Each order block is preceded by a slow-down then an eventual reversal in price.
However often I've found that there are traders who have huge blind spots when it comes to using these areas efficiently. Such as the novice Supply Demand trader who will attempt to use ANY and EVERY order block they can see, on ANY timeframe, overly excited at the prospect of having their own version of a crystal ball.
But very soon, it becomes obvious that you need some serious skills and experiential knowledge
Learning to read where order blocks are located was a life-changing experience in my trading career.
It remains the backbone of how I look at the futures market every single day as a funded prop trader for several prop firms.
Order blocks are areas where you see the large institutional players positions.
Once you understand how to PROPERLY use them, it's literally as if the institutional order book is open before your eyes. Each order block is preceded by a slow-down then an eventual reversal in price.
However often I've found that there are traders who have huge blind spots when it comes to using these areas efficiently. Such as the novice Supply Demand trader who will attempt to use ANY and EVERY order block they can see, on ANY timeframe, overly excited at the prospect of having their own version of a crystal ball.
But very soon, it becomes obvious that you need some serious skills and experiential knowledge
Supply Demand Zone LOCATION
First misconception about order blocks is that any zone can be traded, as long as it scores highly enough.
When I talk about the score of the zones, there is a set of rules to determine if the zone is valid or not. Without going into too much waffling, you are looking at things such as:
Strength of the initial move away from the area
Whether the zone has already been tested (whether the price has returned to it and how many times)
How far away did the price move from the zone before coming back to it (aka the profit margin)
But there is an extra condition that NO ONE talks about: the zone LOCATION.
In my experience the HIGHEST probability reversal zones are always located at the swing EXTREMES. Not the swing middles.
So if your zone of interest is located in the middle of an existing swing, it's anyone's guess whether it will give a meaningful reversal. 'Meaningful' as in: that the price will actually reverse and do another swing away from it. There is always some kind of a reaction when the price runs into any orderblock. But whether the reversal is sustained or not - that's the skill: something you'll need to learn to look out for as you get more familiar with order blocks.
When I talk about the score of the zones, there is a set of rules to determine if the zone is valid or not. Without going into too much waffling, you are looking at things such as:
But there is an extra condition that NO ONE talks about: the zone LOCATION.
In my experience the HIGHEST probability reversal zones are always located at the swing EXTREMES. Not the swing middles.
So if your zone of interest is located in the middle of an existing swing, it's anyone's guess whether it will give a meaningful reversal. 'Meaningful' as in: that the price will actually reverse and do another swing away from it. There is always some kind of a reaction when the price runs into any orderblock. But whether the reversal is sustained or not - that's the skill: something you'll need to learn to look out for as you get more familiar with order blocks.
The Issue of Timeframe
The big problem we see way too often is people trying to do intra day trading using nothing BUT supply demand zones on very low timeframes.
This use of order blocks gives you ZERO edge, because:You have no way to read open sentiment
Whether the market went too long or too short outside of your Regular Trading Hours
No way to notice when the actual institutional traders turn up to the party
Furthermore there are traders who attempt to use very old zones on a 2 min timeframe and then they wonder why it's not working.
It's not working because order blocks are primarily used for LARGER TIMEFRAME POSITIONS.
Daily chart. Weekly chart. Monthly chart.
Even intra day traders need to know where the price is on the large timeframes for best context and narrative. So there's a definite value in understanding order blocks even if you will, like me, only ever do intraday trading.
This use of order blocks gives you ZERO edge, because:
Furthermore there are traders who attempt to use very old zones on a 2 min timeframe and then they wonder why it's not working.
It's not working because order blocks are primarily used for LARGER TIMEFRAME POSITIONS.
Daily chart. Weekly chart. Monthly chart.
Even intra day traders need to know where the price is on the large timeframes for best context and narrative. So there's a definite value in understanding order blocks even if you will, like me, only ever do intraday trading.
Combinations of order flow concepts for best results
The key to successful intra-day trading is not in any single unique concept, but rather in the accumulation of several strategies.
Difficult, I know! Not to mention time-consuming.
This is exactly why our Market Stalkers Method exists - to give you a shortcut to the high probability 'bid and offer' areas (buy or sell areas that have a high probability of either a reversal or continuation).
We created an entire methodology that combines 3 core concepts widely used by professional prop traders, including order blocks, market profile and statistical averages. Including myself.
I've used the Market Stalkers Method every day for over a decade, testing and tweaking the method along the way using my student-traders feedback to make it as clearcut as possible.
But you still need to start with the creation of the weekly plan that maps the large order blocks before you dive into intraday sentiment and things like the initiative vs responsive activity profiling-techno-babble.
Then after you can confidently analyse Supply/Demand zones, you'll be ready to learn how to apply the more complex concept of market profile order flow developments.
To start, I suggest signing up for our short affordable courses that will give you a solid roadmap to follow.
Alternatively if you want the entire method step by step, immediately, please visit the Professional Development Memberships page.
Difficult, I know! Not to mention time-consuming.
This is exactly why our Market Stalkers Method exists - to give you a shortcut to the high probability 'bid and offer' areas (buy or sell areas that have a high probability of either a reversal or continuation).
We created an entire methodology that combines 3 core concepts widely used by professional prop traders, including order blocks, market profile and statistical averages. Including myself.
I've used the Market Stalkers Method every day for over a decade, testing and tweaking the method along the way using my student-traders feedback to make it as clearcut as possible.
But you still need to start with the creation of the weekly plan that maps the large order blocks before you dive into intraday sentiment and things like the initiative vs responsive activity profiling-techno-babble.
Then after you can confidently analyse Supply/Demand zones, you'll be ready to learn how to apply the more complex concept of market profile order flow developments.
To start, I suggest signing up for our short affordable courses that will give you a solid roadmap to follow.
Alternatively if you want the entire method step by step, immediately, please visit the Professional Development Memberships page.
