Liquidity Grabs

The Liquidity Grabs indicator identifies and visualizes market liquidity sweeps by detecting candles that penetrate established liquidity zones before closing back within the range. This tool helps traders pinpoint potential reversal points where a significant volume of market orders has been executed.

Usage

The Usage section explains how to interpret the visual signals and incorporate them into a trading strategy.

• Liquidity Bubbles: The indicator plots bubbles above or below candles that successfully sweep liquidity. A bubble above a candle indicates a Buyside Liquidity Grab (potential bearish reversal), while a bubble below indicates a Sellside Liquidity Grab (potential bullish reversal).
• Bubble Scaling: The size of the bubble is dynamically calculated based on the wick-to-body ratio. Larger bubbles represent more significant "grabs" where the wick is substantially larger than the candle body, suggesting stronger rejection and higher volume execution.
• Trade Planning: Traders can use these grabs to identify "fakeouts." When a liquidity grab occurs at a key resistance or support level, it often signals that the market has exhausted the orders at that level and may reverse direction.

Details

Liquidity grabs occur when the market moves past a recent high or low (pivot) to trigger stop orders or entice breakout traders, only to quickly reverse. The script tracks the most recent five buyside and sellside liquidity zones derived from price pivots.

A grab is confirmed when:

1. The candle's wick penetrates a liquidity zone.
2. The candle's close remains on the "internal" side of that zone (a false breakout).
3. The candle's wick-to-body ratio exceeds the user-defined threshold.

The indicator uses the wick length as a proxy for liquidity depth because long wicks signify a high frequency of orders being filled followed by aggressive price rejection.

Settings

Liquidity Grabs

• Buyside: Sets the color for buyside liquidity grab bubbles (typically used for bearish signals).
• Sellside: Sets the color for sellside liquidity grab bubbles (typically used for bullish signals).
• Pivot Length: Determines the lookback and lookforward period used to define price pivots. A higher value results in more significant, but fewer, liquidity zones.
• Wick-Body Ratio: The minimum required ratio between the wick size and the candle body size for a grab to be validated. Increasing this value filters for more aggressive price rejections.

FAQ

How do I use the Liquidity Grabs indicator?

The tool is best used to identify potential market reversals. Look for large bubbles forming at key structural levels to confirm that a liquidity sweep has occurred before a move in the opposite direction.

What does the bubble size mean?

The size of the bubble is proportional to the wick-to-body ratio of the candle. A larger bubble indicates a more pronounced rejection, often signifying that a larger pool of liquidity was tapped.

How can I access this tool?

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