Identifying demand and supply zones in forex is a key technical analysis technique used to predict potential price reversals or continuations. Demand zones are areas where buying pressure is strong enough to push prices up, while supply zones are areas where selling pressure drives prices down. Here’s how to identify them:

1. Identify Significant Swing Points: Find areas where price has historically reversed or stalled. These are often marked by sharp price movements (impulsive candles) followed by consolidation or reversal.

2. Draw Horizontal Levels: Mark the high and low of these reversal points to create a zone. Demand zones are typically below the current price, while supply zones are above.

3. Focus on Price Action: Observe how price reacts near these zones. A strong reaction, such as a large bullish candle after touching a demand zone, confirms its validity.

4. Volume and Liquidity: Higher trading volume near these zones strengthens their significance, indicating increased market participation.

5. Timeframe Analysis: Use higher timeframes (like daily or 4-hour charts) for more reliable zones, as they are less prone to market noise.

6. Combine with Other Indicators: Use tools like trendlines, moving averages, or RSI to confirm the strength of these zones.

By mastering these steps, traders can better anticipate market movements and make informed trading decisions.