Supply Demand ZONE

The Supply Demand ZONE indicator identifies specific three-bar price sequences representing strong bullish or bearish momentum to highlight potential areas of institutional supply and demand. By coloring bars that meet strict price action criteria, it helps traders visualize where aggressive buying or selling pressure originated.

Usage

The tool highlights specific candlestick sequences on the chart to indicate market imbalances:

• Bullish Sequences (Demand): Bars are colored green when a sequence of three consecutive higher highs and higher closes is detected, with specific open/close relationships indicating sustained upward pressure.
• Bearish Sequences (Supply): Bars are colored red when a sequence of three consecutive lower lows and lower closes is detected, indicating sustained downward pressure.

Traders can use these highlighted zones as areas of interest for potential reversals or trend continuations. For example, when price returns to a previously highlighted demand sequence, it may find support.

Details

The script evaluates a trailing three-bar window to identify specific structural shifts:

• Higher High Logic: Requires three consecutive candles where the current high is greater than the previous high, and the current close is greater than the previous close. It also checks for "internal" price strength, ensuring the low of the current bar remains above the open of the previous bar.
• Lower Low Logic: Requires three consecutive candles where the current low is lower than the previous low, and the current close is lower than the previous close. It also verifies that the current high remains below the open of previous bars to confirm aggressive selling.

The indicator uses the barcolor() function with offsets to highlight the entire three-bar formation that triggered the logic, providing a clear visual block of the "zone."

Settings

• Color Up: Sets the color for the bars identified in a bullish supply/demand sequence.
• Color Dn: Sets the color for the bars identified in a bearish supply/demand sequence.

FAQ

How can I use the alerts provided by this script?

The script includes built-in alert conditions that trigger whenever a valid Higher High or Lower Low sequence is confirmed, allowing you to monitor multiple timeframes without constantly watching the chart.

What timeframes work best for this indicator?

While the logic is applicable to any timeframe, supply and demand zones are often considered more significant on higher timeframes like the 1H, 4H, or Daily charts.

How do I access the Supply Demand ZONE?

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