Identifying High-Quality Supply & Demand Zones
Not every S&D zone is worth trading. Learning to separate A+ setups from garbage setups is what separates profitable traders from breakeven traders.
The 4-Criteria Grading System
Criterion 1: Departure Strength
The move away from the zone must be impulsive and convincing.
| Signal | Quality |
|---|---|
| 3+ big-body candles with no opposing wicks | A+ |
| 2 big candles, one small wick | B |
| Slow grind, multiple mixed candles | C — Skip |
Criterion 2: Freshness (Number of Retests)
0 retests (Fresh) → Highest probability → Trade it 1 retest (Tested) → Good probability → Trade with confirmation 2 retests → Low probability → Skip 3+ retests → Mitigated → Do not trade
Criterion 3: Zone Size
- Too large (> 30 pips on 1H): Hard to place a precise stop → skip or refine on LTF
- Too small (< 5 pips): May be a wick, not a base → verify it's a real consolidation
- Ideal: 8–20 pips on 1H for a clean risk/reward
Criterion 4: HTF Alignment
A demand zone at a Daily order block or within a Weekly bullish structure = A+ multiplier.
A demand zone going against the Daily trend = immediately downgraded to C regardless of other criteria.
How to Draw the Zone
- Find the last candle(s) before the explosive move — this is the base
- Draw from the high to the low of the base candles
- Extend the zone to the right (it remains valid until mitigated)
Visual Framework
████████████████████ ← Explosive departure (ignore this for zone drawing)
█ Base Candle 1 █
█ Base Candle 2 █ ← Draw your zone here (high to low of these)
───────────────────────────── ← Zone top
[ ZONE ]
───────────────────────────── ← Zone bottomReal A+ Zone Example — XAU/USD Daily
Zone: 2,290 – 2,308 Criteria Check: ✅ 1 base candle → 4-day explosive rally (fresh departure) ✅ First retest (never been retested before) ✅ Zone is 18 pips — precise entry possible ✅ Aligned with Weekly bullish structure Grade: A+
Trade Result: Price entered zone at 2,294, reversed → 2,361 (67-pip move, 1:4.5 R:R)
Real C Zone Example — EUR/USD 1H (What to Avoid)
Zone: 1.0875 – 1.0902 Criteria Check: ❌ 3 retests already (nearly mitigated) ❌ Zone formed during London choppy session (weak departure) ❌ Against 4H bearish structure Grade: C — Do Not Trade
Homework
- On EUR/USD and GBP/USD 1H charts, identify all visible S&D zones
- Grade each zone using the 4-criteria system
- Only keep A and B zones on your watchlist for the coming week