Demand Zone Candles

The Demand Zone Candles indicator scans price action to identify potential supply and demand zones based on specific Leg-Base-Leg-Base (LBLB) candlestick patterns.

Usage

The indicator highlights specific candle sequences on the chart to identify areas where institutional buying or selling may have occurred. Traders can use these highlighted zones to anticipate potential price reversals or continuations.

• Demand Zones: Highlighted in green, these indicate a sequence where price dropped (Leg-out), consolidated (Base), and then aggressively moved higher (Leg-in), suggesting a concentration of buy orders.
• Supply Zones: Highlighted in red, these indicate a sequence where price rose (Leg-out), consolidated (Base), and then aggressively moved lower (Leg-in), suggesting a concentration of sell orders.

Examples of usage include looking for price to return to these "base" areas for high-probability entries or using them as targets for existing trades.

Details

The script categorizes candles into two primary types based on their body-to-range ratio:

1. Leg Candles: Candles where the body (close - open) accounts for at least 50% of the total candle range (high - low). These represent strong directional momentum.
2. Base Candles: Candles where the body accounts for less than 50% of the total candle range. These represent indecision or consolidation.

The indicator looks for various combinations of these candles, such as:

• LBLB: One leg, one base, one leg, followed by a base candle.
• LBBLB: One leg, two base candles, one leg, followed by a base candle.
• Complex Chains: Variations including multiple base or leg candles (e.g., LBBBLLLB) to capture different market structures.

Settings

• Zone Offset (0-8): These internal plot settings handle the retroactive coloring of bars to highlight the entire detected pattern sequence on the chart.
• Colors: Users can modify the default green and red colors used to highlight detected demand and supply zones within the Style tab.

FAQ

How do I use the Demand Zone Candles?

You can use the highlighted candles to identify institutional "footprints" where supply or demand imbalances were created, often serving as future support or resistance.

What causes a candle to be colored?

A candle is colored if it is part of a completed Leg-Base-Leg pattern sequence as defined by the internal logic of the script.

How can I access Demand Zone Candles?

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