Zones

Retail Zones: Highs/Lows

The "Highs/Lows" feature in this Pine Script identifies significant support and resistance levels based on the highest highs and lowest lows within a defined lookback period. These levels are critical for understanding market structure and potential reversal points.

It evaluates the highest high and lowest low over a specified lookback period and considers them significant if they remain the highest or lowest for a given number of bars. These levels are then displayed as support or resistance zones on the chart, visually representing these areas.

Using Highs/Lows

Highs and lows are used to identify potential entry and exit points. Traders can place buy orders near support levels (recent lows) and sell orders near resistance levels (recent highs), expecting price to reverse at these zones.

Professional traders may adjust the lookback period based on the asset’s volatility and their preferred trading timeframe. Shorter lookback periods are suitable for highly volatile markets, while longer periods are appropriate for more stable market conditions.

Performance Across Market Conditions

• Trending Markets: Highs and lows help identify pullback levels within a trend, allowing traders to enter trades in the direction of the trend.

• Ranging Markets: They define the boundaries of the range, helping traders to buy near support and sell near resistance.

• Volatile Markets: In highly volatile markets, these levels may be breached more frequently, requiring wider zones or additional confirmation signals.

Retail Zones: Confirmed Highs/Lows

The "Confirmed Highs/Lows" feature builds on the "Highs/Lows" feature by confirming the validity of these levels. A confirmed high or low is determined by its ability to remain unbroken for a specified number of bars, providing a stronger basis for trading decisions.

Using Confirmed Highs/Lows

Confirmed highs and lows provide stronger support and resistance levels. You can use these confirmed levels to set entry and exit points, stop-loss, and take-profit levels. These levels are more likely to hold, reducing the likelihood of false breakouts and improving the accuracy of trade setups.

Traders can optimize the len parameter based on market conditions and timeframes. For volatile markets, increasing the len value ensures only the most significant levels are considered.

Combining confirmed highs/lows with other technical indicators (e.g., moving averages or volume analysis) can further validate trade setups. Alerts can be used to notify traders when price approaches or breaks these levels, improving decision-making efficiency.

Performance Across Market Conditions

• Trending Markets: Confirmed highs/lows can signal continuation or reversal trades, as they provide a clear indication of significant price levels.

• Ranging Markets: The feature may generate more false signals as prices oscillate between support and resistance levels. Additional confirmation may be needed.

• Volatile Markets: Traders should be cautious, as confirmed highs and lows can be breached in volatile conditions. Combining this feature with other indicators can help filter out noise.

Institutional Zones: Supply/Demand Zones

Supply and demand zones are key levels indicating areas of buying and selling pressure in the market. These zones can highlight potential reversal or continuation points.

The SupplyDemand function identifies supply and demand zones by analyzing price action and volume.

The algorithm identifies strong price reactions by analyzing how candles behave. When price shows a sharp rejection in one direction, it may signal an area where buyers or sellers stepped in with strength.

Using Supply and Demand Zones

Supply and demand zones help traders identify key price levels where price might react. These zones serve as entry or exit points—buying near demand zones or selling near supply zones, anticipating price reversals.

Traders can adjust the len parameter to optimize zone detection based on market volatility and timeframes. Combining supply/demand zones with other indicators, like trend lines or moving averages, enhances the reliability of these zones.

Performance Across Market Conditions

• Trending Markets: Supply and demand zones act as retracement points within trends.

• Ranging Markets: Zones define price boundaries, offering buy-low, sell-high opportunities.

• Volatile Markets: Zones may be breached frequently, requiring wider zones or confirmation signals.

Institutional Zones: Order Blocks

Order blocks represent areas where large institutional orders are likely placed, acting as support or resistance zones. The script identifies order blocks by analyzing price patterns (such as bullish or bearish engulfing) and confirming them with volume metrics.

A specified period calculates the volume, ensuring that the identified blocks are based on substantial market activity. These blocks are then plotted on the chart with boxes, indicating potential support or resistance areas.

Using Order Blocks

Order blocks help identify strong support or resistance levels driven by institutional buying or selling. Traders use them to set entry/exit points, manage risk, and determine stop-loss or take-profit levels.

You can further optimize order block detection by adjusting the period settings to match asset volatility and liquidity. Using order blocks in combination with trend analysis, moving averages, or Fibonacci levels can further validate these zones.

Performance Across Market Conditions

• Trending Markets: Order blocks act as continuation zones.

• Ranging Markets: Serve as reversal points within price boundaries.

• Volatile Markets: Effectiveness may diminish as rapid price movements can breach order blocks.