Supply & Demand

The Supply & Demand indicator identifies and highlights key market zones by detecting imbalances in price action and anchoring supply/demand ranges to preceding pivot points. It helps traders visualize areas where large institutional orders may remain unfilled, providing potential entry or reversal zones.

Usage

The Usage section describes how the script can be used to identify institutional market structure. The indicator automatically plots green demand boxes and red supply boxes based on specific price action criteria.

• Identifying Zones: A demand zone is created when an upward imbalance (Fair Value Gap) is detected, anchored to the previous pivot high and low. Conversely, a supply zone is created when a downward imbalance occurs.
• Trade Entries: Traders often look for price to return to these highlighted zones to "fill" remaining orders. A touch or penetration of a demand zone can signal a long opportunity, while a touch of a supply zone can signal a short opportunity.
• Mitigation: The indicator automatically removes boxes once price has mitigated (retested) the zone, ensuring the chart remains clean and only shows active areas of interest.

Details

This script operates on the concept of market imbalances, specifically looking at a sequence of three candles. An imbalance is formed when the wicks of the 1st and 3rd candles do not overlap the range of the 2nd candle. When such an imbalance is detected, the indicator looks back at the pivots immediately preceding the move to define the boundaries of the supply or demand zone. This methodology focuses on capturing the "origin" of a forceful price movement.

Settings

• Pivot High (Source/Left/Right): Adjusts the detection sensitivity for high pivot points. "Left" and "Right" determine the number of bars required to confirm a local peak.
• Pivot Low (Source/Left/Right): Adjusts the detection sensitivity for low pivot points. "Left" and "Right" determine the number of bars required to confirm a local trough.
• Demand Box Color: Sets the background and border color for demand zones.
• Supply Box Color: Sets the background and border color for supply zones.

FAQ

How do I use these zones for trading?

The zones act as high-probability areas for price reversals or continuations. Many traders wait for a candle close or a lower-timeframe confirmation when price enters a supply or demand zone.

Why do some boxes disappear?

Boxes are removed (mitigated) once price action trades back into the zone. This signifies that the liquidity or unfilled orders in that area have likely been processed.

How can I access Supply & Demand?

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