If you’ve read my book on how to determine the strength of a supply or demand zone, you’d know I discuss how to pinpoint high-probability zones by examining the size and duration of the trend or preceeding movement just before a zone formed to gauge market sentiment at that time.
Decent strategy, right?
Sure, it unearths some sweet zones!
BUT, let’s not pretend it’s flawless…
Dissecting the preceding trend or movement is no walk in the park – it demands a solid understanding of how the banks operate and how to gauge market sentiment using price movements.
Plus, the zones with the highest chance of success (the ones following lengthy rises or declines) are a dime a dozen.
All in all, scouting high probability zones is quite the challenge.
But wait, what if there’s another path?
A way to find high probability zones that doesn’t need you to be an expert in banks and order flow, something even a rookie trader could pull off?
Well, buckle up, because there IS a way…
A New Way Of Finding Zones
In my post, “Why Round Numbers Make Great Support And Resistance Levels,” I let you in on a secret:
Most significant reversals kick-off when the price is at or near a big round number – a price ending in 500, 000, or 0000.
See for yourself…
Why these prices, you ask?
It’s simple:
Banks use big round numbers for placing trades, closing trades, and taking profits. Thousands of orders accumulate around these prices, making them goldmines for the banks to exectue actions which require thousands of buyers or sellers.
But that’s not all…
Banks tend execute trading actions at or near similar points to where they’ve executed the same action in the recent past.
For example:
Supply and demand zones form when the banks enter significant trades.
Why does the price return to these zones?
Because banks want to enter their remaining trades at a similar price their inital trade (which created the zone).
My point?
If we know where the banks are most likely to execute significant trading actions (at big round number prices), and we know the spots they’re likely to carry out these actions (supply and demand zones), blending the two together should lead us straight to some high-probability zones.
Let’s take a look…
Here’s the round numbers I showed at the start.
Check them out now…
Here’s how they look with the nearby supply and demand zones marked.
It’s clear: The zones created at or near big round number prices ended up being winners and triggered significant price reversals.
Coincidence?
NO – it’s the big round number.
This is what I mean by using the levels to find high-probability zones.
By waiting for zones to form at or close to big round number prices, you can pinpoint where the banks are likely to execute different trading actions using the orders. Then, you’ve got a pretty solid idea where and when price is likely to reverse.
Neat, huh?
How To Use Round Numbers To Find High Probability Zones
Know what makes this method so powerful?
Compared to other methods of finding high probability zones, checking for round numbers is a breeze for both beginners and experianced traders.
Finding the zones is swift, simple, and perfect for you S & D rookies out there.
You just:
- Mark the nearby big round numbers on the chart.
- Check if any supply or demand zones form nearby.
- Enter once price reaches the zone and shows a signal.
So, how do you find these zones?
Let’s look at a quick example…
FIRST: Mark the big round numbers closest to the current price on your chart.
NEXT: Identify the zones at or near these big round number lines.
Found them?
Good job!
Now, just mark the zones.
Here’s what to do:
For supply zones…
- Find the steep decline where you think a supply zone has formed.
- Place the rectangle on the most recent swing high.
- Drag down to the last small candle before price tanked.
For demand zones…
- Find the steep rise where you think a demand zone has formed.
- Place the rectangle on the most recent swing low.
- Drag up to the last small candle before price took off.
(Important: Locate the last small candle by looking for the last signifcantly smaller bullish or bearish candlestick created before the first large candles forming the steep rise/decline started forming.
With the zones marked, you’re all set!
Now, just wait for a pin bar or engulf and enter your trade.
Easy, right?
The Bottom Line
Finding high probability supply and demand zones will never be a walk in the park. However, this method should help you quickly identify powerful zones without much hassle.
- Just mark the big round numbers,
- Find the nearby zones,
- Then wait for price to return.
Got it?
Now, get out there and crush it!