Last Updated on March 19, 2025 by Arif Chowdhury
As a seasoned Forex trader since 2015, I’ve seen strategies come and go.
But this combo? It’s like finding gold in your backyard. 🔍
Let me break down how combining Supply & Demand zones with OBV creates a trading edge most never discover.
The Power of Supply & Demand Zones in Forex Trading
Supply and demand zones aren’t just economic theory—they’re the foundation of price movement.
These zones represent areas where institutional money has made significant decisions.
When price returns to these zones, history often repeats itself. 📊
Think of supply zones as areas where sellers overwhelm buyers.
Demand zones are where buyers overpower sellers.
Unlike traditional support and resistance lines, these zones provide actual reversal points where big money steps in.
Did you know? A study by the CFTC revealed that institutional traders account for approximately 70% of forex trading volume, making their supply and demand footprints crucial to track.
How to Identify True Supply & Demand Zones
Not all zones are created equal.
Look for these characteristics:
- Strong price rejection – The sharper the move away, the stronger the zone
- Minimal time spent in the zone – Quick entries and exits suggest institutional activity
- Preceding strong momentum – A powerful move before zone creation increases validity
On-Balance Volume: The Secret Weapon 🔫
While price action shows what happened, OBV reveals the why behind the moves.
OBV measures buying and selling pressure by adding volume on up days and subtracting it on down days.
This cumulative indicator helps confirm what’s happening in supply and demand zones.
OBV Divergence: Your Edge
When price makes a new high but OBV doesn’t? That’s divergence—and it’s your early warning system.
Divergence between price and OBV often precedes major reversals.
In fact, a divergence at a supply or demand zone creates a high-probability setup that few traders recognize.
The numbers don’t lie: Research from the Journal of Trading found that trades with confirmed volume divergence show a 62% higher probability of success compared to price action alone.
Combining These Powerhouses for Maximum Effect
Here’s where the magic happens:
- Identify strong supply and demand zones on H4 charts
- Wait for price to return to these zones
- Look for OBV confirmation or divergence
- Enter only when both align
This isn’t just theory—it’s the backbone of my trading approach.
The Automation Advantage
Speaking of advanced strategies, my journey led me to develop a suite of 16 trading bots that leverage these principles across EUR/USD, GBP/USD, USD/CHF, and USD/JPY pairs. 🤖
These bots analyze H4 charts and utilize Supply & Demand zones with OBV among dozens of other strategies to identify high-probability trades.
Each bot is specifically designed to capture 200-350 pip movements, which is where the real money is made.
Impressive fact: My back-testing across 20 years of market data shows these strategies maintained profitability even during major economic crises.
You can check out my entire trading bot portfolio for FREE at my trading bot collection.
Entry and Exit Strategies That Actually Work
Most traders get this wrong.
They either enter too early or exit too late.
Here’s my approach:
- Entry: Wait for a retest of the zone with volume confirmation
- Stop loss: Place it beyond the zone (not at the edge)
- Take profit: Use the next opposing zone as your target
This simple framework transforms how you’ll see the market.
Market Selection Matters
Not all pairs respond equally to this strategy.
I’ve found the major pairs (EUR/USD, GBP/USD, USD/CHF, USD/JPY) respond best to these techniques.
That’s why my bots focus exclusively on these pairs.
Each pair has unique characteristics that require specialized approaches.
Practical Implementation Steps
- Mark your supply and demand zones on H4 charts
- Add OBV indicator
- Wait for price to return to your zones
- Check for OBV confirmation or divergence
- Enter only high-probability setups
- Manage your risk (never more than 1-2% per trade)
The Right Broker Makes All the Difference
Even the best strategy fails with the wrong broker.
After years of testing, I’ve compiled a list of the best Forex brokers that provide the tight spreads and reliable execution needed for this strategy.
Your broker choice can be the difference between profit and frustration.
Don’t overlook this crucial element of your trading business.
The Journey Forward
This strategy isn’t a get-rich-quick scheme.
It’s a professional approach to a professional market.
Master these concepts, apply them consistently, and you’ll see what’s possible.
Whether you trade manually or use my automated solutions, the principles remain the same.
The market rewards those who understand its fundamental nature.
Supply and demand with OBV confirmation is that understanding distilled into a trading edge.