Supply Zone Pattern
A price area where selling pressure overwhelmed buying, causing a sharp decline—price often reacts bearishly on retests.
Quick Answer
A price area where selling pressure overwhelmed buying, causing a sharp decline—price often reacts bearishly on retests.
What Is the Supply Zone Pattern?
A Supply Zone marks an area where institutional or strong selling caused a significant drop in price. Unlike a single order block, supply zones can encompass a broader consolidation before the drop. When price returns to this zone, sellers may re-enter, creating resistance. Supply zones are the bearish counterpart to demand zones and are central to supply-and-demand (S&D) trading alongside SMC order blocks.
How the Supply Zone Forms
- 1Price consolidates or bases at a level
- 2Strong bearish move (rally-base-drop) away from the zone
- 3The base/consolidation area defines the supply zone
- 4Zone remains valid until fully mitigated by price
How to Confirm the Pattern
Best Timeframes for Supply Zone
How to Trade the Supply Zone
- →Identify short entry zones on retests
- →Set stop losses above the supply zone
- →Combine with order blocks for bearish confluence
- →Map resistance levels in S&D and SMC workflows
Common Mistakes to Avoid
Detect Supply Zone Automatically
VaultCharts automatically detects Supply Zone patterns on your charts. No manual analysis needed - the pattern is highlighted with entry zones and targets.