Supply/Demand Zones (Synthetic SMA Candles)

The Supply/Demand Zones (Synthetic SMA Candles) indicator highlights institutional-style supply and demand zones using synthetic SMA-based candles to identify key imbalance areas where price is likely to react.

Usage

The Usage section describes how to interpret the supply and demand zones generated by the script's synthetic candle logic.

• Demand Zones: These are created when a synthetic candle closes above the high of a previous bearish synthetic candle. Traders can use these areas as potential support for long entries.
• Supply Zones: These are formed when a synthetic candle closes below the low of a previous bullish synthetic candle, indicating potential resistance for short entries.
• Mitigation: Users can choose to remove or dim zones once price returns to them (mitigation) or when price breaks through the zone entirely.
• Confirmation: The "Breakout Source" setting allows users to toggle between raw price confirmation or smoothed SMA confirmation for zone creation.

Details

This tool utilizes SMA-smoothed synthetic candles (Open, High, Low, Close) rather than raw price data to detect bullish and bearish engulfing structures. By smoothing the price action, the indicator reduces market noise and focuses on significant momentum shifts.

The logic identifies a bullish breakout when the chosen close source exceeds the high of the last recorded bearish synthetic candle. Conversely, a bearish breakout occurs when the close source drops below the low of the last bullish synthetic candle. The zones are then projected forward from the relevant high/low points of the structural candles.

Settings

Core Calculation

• SMA Length: Determines the period for the Simple Moving Average used to construct the synthetic candles. Higher values result in smoother, more lagging zones.
• Breakout Source: Choose between "Raw Close" for standard confirmation or "SMA Close" for additional confirmation based on smoothed data.

Visuals & Behavior

• Zone Extension (bars): Controls how many bars into the future the zones are projected.
• Show Supply/Demand Zones: Toggles the visibility of bullish (demand) and bearish (supply) areas.
• Supply/Demand Zone Color: Customizes the color and transparency of the detected zones.
• Delete Mitigated Zones: If enabled, zones are removed immediately when touched by price.
• Dim Mitigated Zones: If enabled, zones change to a lighter color upon being touched rather than being deleted.
• Delete Broken Zones: Removes zones if the price closes entirely through the zone boundary.

FAQ

How do I access the Supply/Demand Zones (Synthetic SMA Candles)?

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

What is a synthetic SMA candle?

A synthetic SMA candle is constructed by applying a Simple Moving Average to the open, high, low, and close values individually. This creates a "smoothed" candle that represents the average price action over a specific period.

Can I receive alerts when a zone is created?

Yes, the indicator includes built-in alert conditions for new supply/demand zone creation, zone mitigation, and zone breakouts.