Supply and Demand Zones

The Supply and Demand Zones indicator identifies potential reversal and liquidity areas by projecting zones based on higher timeframe price action and volatility. It provides traders with a multi-timeframe perspective on market structure to assist in both swing trading and intraday strategies.

Usage

The tool can be used to identify key areas of interest where the price may react. These zones are derived from Daily, Weekly, and Monthly timeframes, allowing for comprehensive top-down analysis.

• Swing Trading: Traders can use the Weekly and Monthly zones to identify long-term supply and demand areas for higher-conviction trend reversals or continuations.
• Intraday Trading: Daily zones can serve as institutional reference points for day traders looking for entries or profit targets within a single session.
• Reversal Confirmation: When the price enters a zone, traders can look for secondary price action confirmation (such as candlestick patterns) to execute trades.

Details

The indicator calculates zones by taking the opening price of a specific higher timeframe (Daily, Weekly, or Monthly) and applying an offset based on the Simple Moving Average (SMA) of the High-Low range.

• It uses a 5-period and 10-period SMA of the range to create the boundaries of the zones.
• Supply zones are projected above the opening price, while demand zones are projected below it.
• By using request.security, the indicator pulls data from higher timeframes to plot consistent levels on lower timeframe charts.

Settings

• Daily: Toggles the visibility of the Daily supply and demand zones (Red).
• Weekly: Toggles the visibility of the Weekly supply and demand zones (Blue).
• Monthly: Toggles the visibility of the Monthly supply and demand zones (Green).

FAQ

How do I use these zones for trading?

The zones act as potential support and resistance areas. Look for price exhaustion or reversal patterns when the market enters these colored bands.

Can I use this on any timeframe?

Yes, the script is designed to overlay higher timeframe zones onto your current chart, making it effective for both scalping on low timeframes and position trading on higher ones.

How can I access Supply and Demand Zones?

You can get access on the LuxAlgo Library for charting platforms like TradingView, MetaTrader (MT4/MT5), and NinjaTrader for free.