Lesson #2 - Flow Zone (FZ) Levels
Flow Zone (FZ) levels are liquidity flow-based indicators that serve as key support and resistance levels in the currency market. They are calculated using advanced algorithms that analyze high-value transactions and market dynamics. Due to their precision, FZ levels can be used by traders to identify critical moments in the market where price direction changes are likely to occur.
Characteristics of FZ Levels
Flow Zone (FZ) levels serve two main functions – they can act as support or resistance, depending on the currency pair.
For example:
DeepSkyBlue2 levels on currency pairs where USD (the U.S. dollar) is the base currency (e.g., USDCAD, USDCHF, USDJPY) function as support. However, on pairs where USD is the quote currency (e.g., AUDUSD, EURUSD, GBPUSD), these same levels function as resistance.
Khaki levels work in reverse. On pairs with USD as the base currency, these levels act as resistance, while on pairs with USD as the quote currency, they serve as support.
FZ Levels and Price Zones
Flow Zone levels divide the price chart into several zones:
BSMZ (Big Smart Money Zone) – a zone lasting several hours, typically from 2-3 GMT until around 13 GMT, just before the U.S. session begins.
SSMZ (Small Smart Money Zone) – a shorter zone lasting from several minutes to several tens of minutes.
FZ (Flow Zone) – the liquidity shift zone that exists between BSMZ and SSMZ zones.
Several SSMZ zones can occur within a single trading day, while there is usually only one BSMZ.
Trading Models on FZ Levels
BSMZ: The optimal time for trading Flow Zone levels within the BSMZ is between 5 and 12 GMT. If the price breaks support or resistance during this period, the model suggests that it should return to the zone before or during the U.S. session.
SSMZ: The price usually leaves the boundaries set by the SSMZ zone only after the zone has ended. If the price exits the SSMZ zone before it ends, the zone is usually retested, just like the BSMZ zone.
Trading the boundaries of BSMZ and SSMZ zones: Another trading model involves treating the levels that define the boundaries of the BSMZ and SSMZ zones as typical support and resistance levels. It is expected that the price will reverse at these levels. In almost every case, the price should react by a few (or several) pips, creating short-term trading opportunities.
FZ (Flow Zone) Levels
FZ zones appear between the BSMZ and SSMZ zones and are also referred to as liquidity shift zones.
Important Information Regarding Flow Zone Levels
There are many levels in the Flow Zone group, and they can have different colors and functions on different currency pairs. Before making any investment decisions, it’s essential to check how a particular level has behaved in the past.
To help identify FZ zones, the FZ Candle indicator is available for free in the Download section on DeepMarketLevel.com.
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CADJPY
The CADJPY currency pair brings together the Canadian dollar (CAD) and the Japanese yen (JPY).
The Canadian dollar, often classified as a commodity currency, is heavily influenced by the oil market, as Canada is one of the largest producers and exporters of oil. Consequently, CAD is highly correlated with oil prices.
Lime & Yellow
Lime and Yellow levels are important levels associated with Futures contracts. These levels indicate key points where significant transactions have occurred, regardless of the current price level. As the names suggest, these levels are tied to futures contracts and do not necessarily reflect the current market price.