Liquidity Echo

The Liquidity Echo indicator provides a specialized detection system for institutional liquidity sweeps at higher-timeframe compression zones. It utilizes a four-layer architecture to identify stop-hunt mechanisms and generate structured reversal entries with automated trade management.

Usage

The Usage section describes how the script can be used to identify high-probability reversal setups. The indicator functions as a unified model where signals are only generated when all four detection layers—HTF compression, volume vacuum, sweep classification, and pressure gradient—align simultaneously.

• Trend Filtering: By default, the tool uses an EMA as a directional filter. Long signals are prioritized when price is above the EMA, and short signals are prioritized when price is below it.
• Signal Interpretation: Signals are graded on a 0-10 scale and categorized into four levels: PRIME (Gold Diamond), HIGH (Green Circle), MED (Yellow Square), and LOW (Gray Cross). Traders can use these grades to filter for higher-conviction setups.
• Trade Management: Upon signal confirmation, the script automatically plots entry, stop loss, and two take-profit targets. It includes features for moving stops to breakeven after Target 1 and an optional trailing stop.
• Visual Context: Look for purple or orange rectangular boxes representing higher-timeframe compression zones. Faint yellow background tints on candles indicate a "volume vacuum," signaling institutional preparation before a sweep occurs.

Details

The indicator is built upon a four-layer detection architecture designed to track institutional money flow:

1. HTF Compression Zones: Measures higher-timeframe bar ranges to find coiling markets. Zones are color-coded by "touch count," where orange zones represent levels tested multiple times, indicating higher significance.
2. Volume Vacuum: Identifies quiet periods where market participation drops before a sweep, helping to filter out continuation moves.
3. Sweep Classification: Categorizes the liquidity grab into specific types: Minor, Major, Flush (sharp wicks), or Grind (slow pushes through a level).
4. Pressure Gradient: A momentum-shift detector that measures the rate of change of within-bar close locations to confirm buying or selling pressure is accelerating in the reversal direction.

An Auto-Calibration Engine measures wick-body ratios, volume variation, and ATR percentiles in real-time. This allows the indicator to adapt its thresholds to different asset classes (Crypto, Forex, Indices) without manual configuration.

Settings

Auto-Calibration

• Auto-Calibration: Enables the engine to set thresholds automatically based on current market behavior.
• Calibration Window: Sets the number of bars used for behavioral measurement (default is 100).
• Sensitivity Bias: Adjusts the global threshold strictness (Conservative, Neutral, or Aggressive).

HTF Compression Zones

• HTF Reference: Selects the higher timeframe for zone detection (e.g., 15m for a 5m chart).
• Max Active Zones: Limits the number of simultaneously tracked liquidity zones.
• Min Zone Touches: Requires a zone to be tested a specific number of times before a signal is valid.

Sweep Detection

• Major/Flush Sweep Wick: Adjusts the ATR-based requirements for identifying aggressive stop hunts.
• Enable Grind Sweep Path: Toggles detection for slow-push sweeps that lack sharp wicks.
• Sweep Window: Determines how many bars the system waits for a commitment candle after a sweep.

Trade Management

• Stop Loss Distance: Sets the initial stop loss in ATR units.
• Target 1/2 Distance: Sets the take-profit levels in ATR units.
• Trailing Stop: Enables a ratcheting stop that follows price movement.
• EMA Trend Filter: Toggles the requirement for signals to align with the macro EMA trend.

FAQ

How do I interpret the different signal shapes? The shapes represent signal quality based on a composite score: Gold Diamonds are Prime (8-10), Green Circles are High (6-7), Yellow Squares are Medium (4-5), and Gray Crosses are Low (<4).

What is "Grind Mode"? Grind Mode detects reversals where price slowly pushes past a level over several bars rather than spiking through it with a single wick. This is common in equity indices and forex.

How do I access the Liquidity Echo indicator? You can get access on the LuxAlgo Library for charting platforms like TradingView, MetaTrader (MT4/MT5), and NinjaTrader for free.