Supply & Demand Zone Detection

The Supply & Demand Zone Detection indicator helps traders identify institutional areas of accumulation and distribution by automatically visualizing supply and demand zones alongside breaker blocks. This tool provides market context by highlighting key areas where price is likely to reverse or continue its trend based on structural imbalances.

Usage

The tool can be used to identify high-probability zones where large market participants have previously entered the market.

• Demand Zones: Visualized when price shows strong bullish rejection or accumulation. These are potential areas for long positions on retests.
• Supply Zones: Visualized when price shows distribution or strong bearish rejection. These are potential areas for short positions on retests.
• Breaker Zones: Formed when a previously active supply or demand zone is invalidated by price. These zones highlight market structure shifts and potential "flip" areas where support becomes resistance or vice versa.
• Signals: Use the optional bullish (▲) and bearish (▼) markers to spot potential reactions when price interacts with a detected zone.

Details

The indicator utilizes a multi-layered detection logic that incorporates swing structure, volume, and volatility. Unlike static pivot-based tools, this script requires specific momentum and volume conditions to validate a zone, ensuring only significant price imbalances are plotted. Additionally, the script features a dynamic merging system that combines overlapping boxes to maintain a clean chart and prevent visual clutter.

Settings

Overlays

• Demand Zones: Toggles the visualization of demand (bullish) zones.
• Supply Zones: Toggles the visualization of supply (bearish) zones.
• Breaker Zones: Enables the detection of invalidated zones that act as market structure shifts.
• Bullish/Bearish Color: Customizes the visual colors for the respective zones.

Filters

• Volume: Enable this to filter zones based on whether the base candle volume exceeds its moving average.
• ATR: Enable this to ensure zones are formed during periods of high volatility.

Calculations

• Swing Length: Adjusts the sensitivity of the pivot detection used for zones.
• Volume/ATR Sensitivity: Multipliers used to fine-tune the filter requirements.

Signals

• Signals: Toggles the display of on-chart interaction markers.

FAQ

How do I use the breaker zones?

Breaker zones appear when a supply or demand zone is broken. This often indicates a shift in market sentiment, where the previous imbalance has been overcome by the opposing side.

Why are some zones disappearing?

Zones are automatically closed and converted to breaker zones (if enabled) once price breaks through them, as the original imbalance is considered "filled" or "violated."

How can I access this tool?

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