Liquidity Magnet

The Liquidity Magnet indicator is a composite scoring engine that identifies and ranks liquidity zones based on the probability of price reaching them. It highlights the single most likely target as a "top magnet," providing traders with probabilistic context regarding resting order clusters at swing highs, swing lows, and equal levels.

Usage

The Usage section describes how the script can be used to interpret market context through liquidity distribution.

The indicator identifies potential liquidity pools and assigns a probability score to each. Traders can use the "Top Target" and "Magnet Pull" metrics on the dashboard to gauge the current directional bias and the proximity of price to the most significant liquidity zone.

• Contextual Analysis: Use the Top 3 targets to evaluate the dominance of the primary magnet. A high probability gap between the first and second targets indicates a more decisive draw on price.
• Historical Validation: By enabling "Historical Track," users can see markers of past top magnets. This allows for an observational review of how often price successfully "touched" a magnet versus when the magnet "expired" without being reached.
• Directional Bias: The Magnet Pull metric indicates the side of the market where the majority of liquidity scoring is concentrated (bullish if the top zone is above price, bearish if below).

Details

The script utilizes a non-binary detection system and a logarithmic distance filter to process liquidity zones.

• Liquidity Detection: The tool identifies swing points using a pivot lookback. Nearby pivots are merged into "equal liquidity" zones using a tolerance band that automatically scales based on the chart's timeframe.
• Composite Scoring: Each zone is scored based on four independent factors:
  • Strength: Normalized volume at the pivot bar and clustering bonuses.
  • Proximity: An inverted-U curve calculation based on logarithmic distance to price.
  • Age: A maturity curve that discounts very fresh zones and gradually decays very old ones.
  • Momentum: Alignment with short-term EMA momentum.
• Auto-Scaling: Distance filters and equal-level tolerances adjust dynamically. For example, weekly charts utilize wider ranges than 1-minute charts to ensure the analysis remains relevant to the current timeframe's volatility.
• Pruning: To maintain chart clarity, zones are removed if they are swept by price, exceed the maximum age, or move too far from the current price in log space.

Settings

Liquidity Detection

• Pivot Lookback: Number of bars on each side required to confirm a swing high or low.
• Max Active Pools: Maximum number of liquidity zones tracked simultaneously.
• Min/Max Pool Age: The age range in bars for a zone to remain active.

Equal H/L Clustering

• Auto-Scale Tolerance by Timeframe: Automatically adjusts the clustering threshold based on the chart interval.
• Manual Tolerance %: Percentage threshold for merging nearby pivots when auto-scale is off.
• Equal H/L Bonus Mult: A multiplier applied to the score of zones formed by multiple touches.

Distance Filter (Log-Scale)

• Auto-Scale by Timeframe: Automatically sets the maximum log-distance for active zones.
• Manual Log-Distance: Sets the symmetric distance cap for zones above and below price.

Probability Scoring (Weights)

• Strength/Proximity/Age/Momentum Weights: Adjusts the relative influence of each factor on the final probability score.

Historical Track

• Show Historical Top Magnets: Displays markers for past magnets and their outcomes.
• Tracking Window (bars): The duration a former magnet stays active before being marked as expired.

FAQ

How do I interpret the probability percentages? The percentages represent relative weights among the currently active zones. They indicate which zone the composite model ranks as most significant, rather than an absolute statistical certainty of price movement.

Why do liquidity zones appear several bars after a high or low? The script uses a fixed pivot lookback to ensure zones are confirmed. This prevents repainting and ensures that the liquidity levels shown are based on confirmed market structure.

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