3 CANDLE SUPPLY/DEMAND

The 3 CANDLE SUPPLY/DEMAND indicator identifies specific price action patterns across three consecutive bars to highlight potential market turning points and institutional zones.

Usage

The tool is designed to automate the detection of supply and demand zones based on price displacement.

• Demand Zones: These are identified when a specific three-candle sequence occurs: the second candle closes below the low of the first, followed by a third candle closing above the highs of both previous bars. A green triangle is plotted below the bar, and a horizontal zone is drawn using the lowest low and highest high of the three-candle formation.
• Supply Zones: These are identified when the second candle closes above the high of the first, followed by a third candle closing below the lows of both previous bars. A red triangle is plotted above the bar, and a horizontal zone is drawn.

The plotted lines persist on the chart to act as visual support or resistance levels until they are either superseded by a new signal or breached by price action. Traders can use these zones to anticipate reversals or as targets for profit-taking.

Details

The script utilizes two distinct logical components to confirm a valid zone:

1. Break of Structure (BOS) Logic: This ensures that the third candle has enough momentum to close beyond the extremes of the preceding two candles, signaling a shift in market control.
2. Fractal Logic: This compares closes and opens to ensure the candles within the pattern represent a corrective move followed by an impulsive expansion.

The indicator is "alert-optimized," allowing users to set notifications when these specific institutional patterns are detected in real-time.

Settings

• Color Settings: While the core logic is fixed, the visual output uses standard green for demand and red for supply to indicate bullish and bearish sentiment respectively.
• Shape Plotting: Triangles are plotted at an offset to ensure they align with the candle that completes the 3-bar pattern.

FAQ

How can I use these zones for trading?

Demand zones can be viewed as potential buy areas where buyers previously overwhelmed sellers, while supply zones represent areas where selling pressure was historically dominant.

When do the lines disappear?

The horizontal lines representing the zones are programmed to reset or delete if price action moves significantly through the established zone or when a new signal of the same type is generated.

How do I access 3 CANDLE SUPPLY/DEMAND?

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