Supply & Demand Zones

The Supply & Demand Zones indicator identifies high-probability areas of institutional interest by combining liquidity sweep detection with smart money concept filters. It focuses on detecting liquidity grabs followed by strong displacement or fair value gaps to confirm the presence of supply and demand imbalances.

Usage

The tool marks demand zones with a green "D" label and supply zones with a red "S" label. Traders typically look for entries when the price returns to these shaded zones.

• Demand Zones: Form when price sweeps below a swing low followed by a bullish displacement. Look for long opportunities or place stop losses below the zone.
• Supply Zones: Form when price sweeps above a swing high followed by bearish displacement. Look for short opportunities or place stop losses above the zone.
• Flipped Zones: When a zone is breached with momentum, it can "flip" its polarity (e.g., demand becomes supply). These are highlighted with blue/orange markers.

Details

The script utilizes a multi-step confirmation process:

1. Liquidity Sweep: Monitors pivot highs and lows to detect price action that "cleans" out stop orders.
2. Displacement: Uses Average True Range (ATR) and candle body percentage to ensure the move out of the sweep is aggressive enough to signify institutional participation.
3. Volume Filter: An optional setting that ensures zones only form during volume spikes relative to a moving average.
4. Non-Repainting: All calculations are based on closed, confirmed historical data to ensure signals do not shift after appearing.

Settings

Core Logic

• Pivot Lookback Left/Right: Sets the number of bars used to identify pivot points for liquidity sweeps.
• Min Displacement (ATR Multiple): Controls how explosive the move must be (relative to volatility) to create a zone.
• Min Body % for Displacement: Ensures candles have large bodies and small wicks to confirm momentum.

Filtering & Lifecycle

• Max Zones to Display: Limits the number of active zones on the chart.
• Delete Zone When Broken: Automatically removes zones when price closes through them with momentum.
• Allow Zone Flip: Enables the polarity change logic for breached zones.
• Min Bars Between Zones: Prevents the script from cluttering the chart with overlapping or adjacent signals.

Volume Confirmation

• Volume Confirmation: Toggles the volume spike requirement.
• Volume Threshold: Sets the multiplier for the volume moving average (e.g., 1.2x).

FAQ

How do I access Supply & Demand Zones?

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

Which timeframes are best for this tool?

While it works on all timeframes, it is optimized for intraday trading (5m to 1H). Using higher timeframes can help identify major structural zones for context.

What is the purpose of the "D" and "S" labels?

The "D" stands for Demand and "S" for Supply. These labels appear at the moment the displacement is confirmed following a liquidity sweep, signaling the start of a potential zone.