Supply & Demand Switch Role

This talks about when a supply candle turns into a demand candle and a demand candle turns into a supply candle.

This is when the price fails to reject the supply/demand candle and instead breaks through it.

Why does this happen?

(In case of a demand candle turning into a supply candle) Let’s say a demand candle has formed and it pushed the price up. Then the price came down to that demand candle and instead of bouncing up, it broke through (with no movement to the upside). Price does this because there are more sell orders overpowering the buying force which makes it go down. That demand candle then acts as a supply candle. So, when the price goes up to that candle, it goes down because the selling force (sell orders), which pushed the price down earlier, is still there and will now push the price further.

(In case of a supply candle turning into a demand candle) Let’s say a supply candle has formed and it pushed price down.

Then price came up to that supply candle and instead of bouncing down, it breaks through (with no movement to the downside).

Price does this because there are more buy orders overpowering the selling force which makes it go up.

That supply candle then acts as a demand candle. So, when price goes down to that candle, it goes up because the buying force (buy orders), which pushed price up earlier, is still there and will now push price even further.

When supply turns into demand and demand turns into a supply, that’s called a valid breaker block.

Incorrect switch role

This is when a supply candle still remains a supply candle and a demand candle still remains a demand candle even though price breaks through.This is explained in the case of a supply candle. The opposite applies to a demand candle.Over here we can see a supply candle in the premium zone. When price reaches it, it gives a small push down (the red candle). Then price breaks through the supply candle.This might seem like a supply turned demand candle but it’s not. Since price gave a small push down (in the form of a red candle), it shows that price did react from the supply level (even though only a little)

Later on, we can confirm that the supply candle remains a supply candle by looking at how price rejects from it and goes down.

When supply zone remains a supply zone and a demand zone remains a demand zone (like we see in the examples above), that’s called an invalid breaker block.

How this can be programmed: To check if price broke straight through a level, take 2 ZigZag degrees and check if the smaller ZigZag is the same as the bigger ZigZag leg. The smaller ZigZag should not form small zigzag lines inside the bigger ZigZag leg. Examples: