Supply/Demand Candles

The Supply/Demand Candles indicator identifies and highlights specific candle types based on their range and body-to-wick proportions to assist traders in spotting potential institutional supply and demand zones.

Usage

The indicator classifies candles into two main categories to help traders understand market sentiment:

• Non-Directional Candles (50% Candles): These are candles where the body size (absolute difference between open and close) is less than 50% of the total candle range (high to low). These are highlighted in blue and represent periods of indecision or consolidation.
• Supply/Demand Candles: These are identified when the current candle's range is significantly larger (over 3x) than the previous candle's range. These represent strong directional momentum.
  • Bullish (Demand): A strong range candle closing higher than it opened, colored green.
  • Bearish (Supply): A strong range candle closing lower than it opened, colored red.

Traders can use these highlighted bars to identify potential breakout points or zones where significant volume has entered the market.

Details

The script uses simple geometric calculations to determine candle significance:

1. Body-to-Range Ratio: It calculates math.abs(open - close) / math.abs(high - low). If this value is below 0.5, the candle is marked as non-directional.
2. Relative Volatility: It compares the current candle's total range (high - low) against the previous candle's range. A multiplier of 3 is used as the threshold to define a "Supply/Demand" candle, indicating a volatility spike.

Settings

As this script is a pure calculation-based visualizer, it currently utilizes hardcoded logic for its classifications:

• 50% Threshold: Determines if a candle is "Non-Directional" based on the body size relative to the wick.
• 3x Range Multiplier: The sensitivity setting for detecting Supply/Demand candles based on the previous bar's expansion.

FAQ

How do I use the Supply/Demand Candles?

You can use it to identify "ignition" bars that start a new trend or "base" candles (the non-directional ones) that form the foundation of a supply or demand zone.

What do the colors represent?

Blue represents a "50% candle" or indecision. Green represents a high-momentum bullish expansion (Demand), and red represents a high-momentum bearish expansion (Supply).

How can I access the Supply/Demand Candles?

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