Volume-Weighted S/R Zones

The Volume-Weighted S/R Zones indicator automatically detects support and resistance zones from price pivots, scores them based on volume and price reaction, and generates a structured risk-management plan. It filters market noise by identifying high-value reversal points and tracking breaks and retests to provide actionable signals.

Usage

The Usage section describes how the script can be used to identify key market structures and potential trade entries. The indicator highlights Supply (resistance) and Demand (support) zones on the chart, with visual prominence determined by their calculated strength.

• Zone Identification: Users should look for green boxes (support) and red boxes (resistance). The opacity of the box and the star rating (★ to 🔥) indicate the zone's significance. A "×N" label indicates how many times the zone has been tested.
• Signal Interpretation:
  • BRK (Break): Appears when a zone is breached with sufficient volume and momentum.
  • RT (Retest): Appears when the price returns to a broken zone and shows a confirmed reaction in the new trend direction.
• Risk Management: When a signal occurs, the tool plots a virtual trade plan. The dotted blue line represents the entry, the solid red line is the stop-loss, and dashed green lines indicate three take-profit targets (TP1, TP2, TP3).
• Dashboard: The top-right dashboard provides a real-time summary of the trend (Bullish/Bearish), active signal status, and historical session statistics like Win Rate and Average R-multiple.

Details

The indicator utilizes a multi-step pipeline to ensure only high-probability levels are displayed:

• Strength Scoring: Each zone is assigned a score from 0-100 based on three components:
  1. Volume Score (0-40): Calculated by comparing the volume at the pivot bar to the average volume.
  2. Reaction Score (0-30): Measures how far the price moved away from the pivot relative to the ATR.
  3. Touch Bonus: Adds weight as a zone is repeatedly tested without breaking.
• ATR Clustering: Instead of drawing thin lines at every pivot, the script merges nearby pivots into a single "zone" if they fall within a specific ATR-based distance.
• Age Decay: To maintain relevance, zones gradually lose strength over time. Older levels that haven't been touched eventually fade and are removed.
• Break/Retest Validation: Breaks are filtered by volume "floors" (to avoid thin-volume traps) and "caps" (to avoid news spikes). Retests require the price to touch the zone and close in the trend direction with a minimum ATR reaction.
• Zone-Aware SL: The stop-loss logic dynamically places the exit point either at a standard ATR distance or just behind the structural zone, whichever provides a more logical invalidation point.

Settings

Main Settings

• Pivot Lookback: The number of bars on each side required to confirm a high or low pivot.
• Max Active Zones: Limits the number of zones displayed to keep the chart clean.
• Zone Merge Distance: The ATR-based radius used to group multiple pivots into one zone.
• Min Score to Display: Filters out weak zones that do not meet a minimum strength threshold.

Zone Detection

• ATR Length: The period used for Average True Range calculations.
• Age Decay Rate: Controls how quickly old zones lose their strength score.
• Max Zone Age: The maximum time a zone can exist before being removed (Bars, Hours, or Days).

Filters

• Volume Filter for Breaks: Requires a volume spike above a multiplier to confirm a breakout.
• Momentum Filter: Ensures the breakout candle has a minimum size relative to ATR.
• Mitigation Filter: If enabled, only the first retest of a broken zone will trigger a signal.

Risk Management

• Risk Preset: Choose between Conservative, Balanced, Aggressive, or Scalping presets for SL and TP.
• Zone-Aware SL: Toggles the logic that places stops behind structural support/resistance.
• Break-Even After TP1: Automatically moves the stop-loss to the entry price once the first target is hit.

FAQ

How do I interpret the different star icons on the zones? The icons represent the zone's strength score: ★ (weak), ★★ (medium), ★★★ (strong), and 🔥 (very strong/high volume). Higher-tier zones are generally more reliable for bounces or significant breakouts.

Why are there no zones on the most recent bars? The indicator uses a "Pivot Lookback" to confirm reversals. A zone only appears once the price has moved a specific number of bars away from the peak or trough to ensure the pivot is valid and not repainting.

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