ZONE Supply Demand Strategy1

The ZONE Supply Demand Strategy1 indicator identifies specific price action clusters to establish supply and demand zones based on historical price behavior. It aims to highlight potential base candles that precede significant price movements, allowing traders to forecast future support and resistance regions for trade execution.

Usage

The indicator is designed to identify "base candles" that occur before a block of consecutive candles in a specific direction. In a buy-oriented scenario, the strategy identifies a series of candles and marks the preceding candle as the base. Traders can draw horizontal levels from the open and close of this base candle into the future. When price retraces into this established zone, it is interpreted as a potential area for long entries.

The script also visually highlights specific price action patterns, such as sequences of higher highs and higher closes, by changing the bar colors on the chart to signify momentum shifts.

Details

The script focuses on identifying a "Higher High" condition through a series of specific requirements:

• Current high and previous high must be greater than their preceding highs.
• Current close and previous close must be greater than their preceding closes.
• The candles must be bullish (close > open).
• Specific relationship between lows and opens to ensure strong upward displacement.

When these conditions are met, the script identifies the formation as a significant price block. While the original logic suggests using these zones for execution, traders should be aware that the zone acts as a historical reference point for liquidity.

Settings

• Period: Defines the lookback period for the underlying calculations.
• Smooth: Determines the smoothing factor applied to the internal logic to filter out market noise.

FAQ

How do I use the zones identified by this tool?

Look for the highlighted base candles that appear before a strong move. Draw a zone between the open and close price of that base candle; these areas often act as demand or supply when price returns to them.

What do the colored bars signify?

The bars change color when a specific "Higher High" sequence is detected, indicating that the market is currently in a state of strong upward momentum.

How can I access ZONE Supply Demand Strategy1?

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