BOS/CHOCH Demand & Supply

The BOS/CHOCH Demand & Supply indicator identifies and plots supply and demand zones using Smart Money Concepts (SMC) methodology by detecting structural breaks and reversals in price action.

Usage

The tool is used to identify high-probability reversal and continuation zones based on market structure.

• Demand Zones (Green): These areas indicate where buying pressure has previously overcome selling pressure. Traders often look for long entries when price returns to these levels.
• Supply Zones (Red): These areas mark where selling pressure has historically exceeded buying pressure, serving as potential interest points for short entries.
• BOS (Break of Structure): These zones indicate trend continuation. A bullish BOS occurs when price closes above a previous swing high in an uptrend, while a bearish BOS occurs when price closes below a previous swing low in a downtrend.
• CHOCH (Change of Character): These zones signal potential trend reversals. They are identified when price breaks a swing point that suggests a shift in market sentiment.
• Inducement Filter: When enabled, the indicator only draws zones if the swing point first grabbed liquidity (traded beyond a previous swing) before the break, filtering for higher-quality setups.

Details

The indicator utilizes ta.pivothigh() and ta.pivotlow() to establish market structure. It allows for multiple lookback periods simultaneously, enabling the detection of both minor and major structural levels on a single chart.

The zone boundaries are constructed based on specific candle price action:

• Demand Zones: Defined by the range between the swing low's candle low and the highest of its open or close.
• Supply Zones: Defined by the range between the swing high's candle high and the lowest of its open or close.

The script manages the lifecycle of these zones dynamically. A zone remains active until it is mitigated (touched by price), at which point it turns gray. If price fully breaks through a zone, it is removed from the chart to maintain clarity.

Settings

• Pivot Lookback Periods: A comma-separated list of integers (e.g., 5, 15, 30) used to define the sensitivity of swing point detection.
• Max Number of Active Boxes: Limits the number of boxes displayed per type to optimize performance.
• Show Break of Structure (BOS) Zones: Toggles the visibility of continuation zones.
• Show Change of Character (CHOCH) Zones: Toggles the visibility of reversal zones.
• Require Inducement / Liquidity Grab: If enabled, zones are only plotted if price took liquidity from a previous swing point prior to the break.
• Alert Settings: Individual toggles for alerts on new confirmed zones, zone mitigations, and zone breaks.

FAQ

How do I interpret a mitigated zone?

A mitigated zone (colored gray) indicates that price has entered the zone but has not yet broken through it. This suggests some of the institutional orders at that level may have been filled.

What is the advantage of using multiple lookback periods?

Using multiple periods allows you to see confluence between different structural scales. Smaller lookbacks identify short-term intraday structure, while larger lookbacks highlight significant macro levels.

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.