In SD trading, Rally-Base-Rally (RBR) and Drop-Base-Drop (DBD) zones are integral to understanding and using supply and demand effectively.
RBR and DBD zones reveal the footprints of major market players and give you clues about where the price might be headed next.
An RBR pattern signifies a demand zone.
In simpler terms, this is where buyers (demand) have previously overwhelmed sellers (supply), leading to a rally in price. It’s a three-part process:
- Initial rally (price increase)
- Consolidation phase (the base),
- Another rally.
On the flip side, a DBD pattern represents a supply zone.
This is where sellers (supply) have gained the upper hand over buyers (demand), causing a drop in price. Again, we’re looking at a three-part pattern:
- Initial drop (price decrease),
- Consolidation period (the base),
- Another drop.
These patterns allow traders to visualize and anticipate market reactions at these supply and demand zones. The underlying principle is that price has a high likelihood of reacting in a similar manner when it revisits these zones.