Supply & Demand Flip Zones

Supply and demand flip zones are levels in which there is an interaction or exchange between a zone of supply and demand, or demand and supply. These zones typically form when price is moving in one direction with a zone of supply or demand sitting in its way, which causes a brief reaction before failing.

Supply and demand flip zones can be thought of as levels in price where there were previously buyers or sellers defending a zone, failing to defend it, and control shifting from one side to the other.

What Are Supply To Demand Flip Zones

Supply-to-demand flip zones are a bullish type of demand zone in which we see a supply zone create a reaction in the seller’s attempt to defend against buyers before they inevitably overpower the sellers in the market and the supply level fails. This effectively converts the supply level into a demand level as shown in the diagram above.

What Are Demand To Supply Flip Zones

Demand-to-supply flip zones on the other hand are a bearish type of supply zone in which we see a demand zone produce a reaction in the buyer’s attempt to defend against sellers before they finally overpower the buyers in the market and the demand level fails. This effectively converts the supply level into a demand level as shown in the diagram above.

How To Use Flip Zones In Your Trading

Flip zones are an effective tool for quickly switching your bias when the control of buyers or sellers quickly gets overridden. 

These types of supply and demand zones are often utilized by supply and demand traders who like to trade break and retest strategies as it helps them determine who is in control between buyers and sellers, increasing their chances of joining the side of the market in which is most likely to move and thus result in a profitable trade for them.

It should be noted that like any other concept or confluence in trading, flip zones cannot be relied upon in isolation, and should only be used in conjunction with fundamental concepts like market structure and liquidity, as not every “flip zone” will hold, or produce a valid trade setup or signal.

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Robert Castillo
FX Trader & Analyst
Writer & Editor

Rob is a funded trader from Toronto, Canada, and has been trading currencies, commodities, stocks, and cryptocurrencies for over 7 years. Outside of trading he enjoys making music, boxing, and riding his motorcycle.