Understanding Order Blocks, Supply & Demand Zones in Trading (With Code)

Regarding price action trading, few concepts are as widely discussed — and overhyped — as order blocks and supply and demand zones. If you've spent time in trading communities or watched YouTube trading gurus, you've likely heard about these "magic" levels that supposedly move the markets.

However, there is no hidden manipulation or voodoo magic behind why prices react to these levels. Instead, it's a simple function of market mechanics: large traders need Liquidity to enter or exit positions without causing excessive price slippage.

In this article, we'll break down the reality behind order blocks, explain why they work, and even use Python to visualize how these zones form.

🔍 The Logic Behind Order Blocks

At its core, an order block (or supply/demand zone) represents a price level where large institutions accumulate or distribute their positions. Here's why:

1. Big players (institutions, hedge funds, etc.) cannot buy or sell anywhere—they need enough Liquidity.
2. These liquid areas often appear as sideways price action because both buying and selling happen.
3. Big traders step in to buy (and vice versa) when there's a large amount of selling, leading to…