Liquidity Pools + Sweep Signals

The Liquidity Pools + Sweep Signals indicator maps market liquidity by tracking swing highs and lows to identify potential "traps" and collection zones. It differentiates itself by visualizing the lifecycle of liquidity pools—from initial building to sweep rejection and eventual breakage—allowing traders to distinguish between clean breakouts and liquidity raids.

Usage

This tool can be used to establish directional bias and filter high-probability trade triggers. By mapping where liquidity is "parked," traders can avoid entering in low-interest zones.

• Directional Bias: When price enters a Sell liquidity pool (premium) or a Buy liquidity pool (discount), look for reversal signs rather than blindly following breakouts.
• Sweep Identification: A sweep occurs when price pierces a pool boundary and closes back through the midline. These signals can be used as immediate mean-reversion entries or as "alerts" to wait for further market structure shifts.
• Liquidity Density: Pools with a higher "hit count" represent levels with significant order accumulation, making them more likely targets for a stop-run before a major reversal.
• Quality Filtering: Use the weighted scoring system to ignore weak "pokes" into liquidity and focus on aggressive rejections backed by volume and wick size.

Details

The indicator constructs liquidity zones around pivot levels and manages them dynamically. Unlike static support/resistance, these pools merge nearby levels based on ATR distance to create a "canvas" of the most relevant price areas.

The sweep logic is based on a multi-layered scoring model (0–100):

• Base Layer: Evaluates the sweep candle's penetration depth, reclaim strength, and wick-to-body ratio.
• Context Layer: Factors in EMA 200 distance, market structure positioning (MSS), and "Effort" (volume spike relative to the ATR).
• Displacement (Optional): Requires a follow-through candle to confirm the reversal, helping filter out noise at the expense of a slightly later entry.

Settings

Core

• Swing Length: Sets the lookback period for identifying pivot highs and lows.
• Merge Distance: Defines how close (in ATR) levels must be to combine into a single pool.
• Pool Zone: Adjusts the width of the liquidity zones.
• Activate Scoring: Enables the 0-100 quality filter for sweep signals.

Sweep Confirmation

• Wick Ratio Scale: Controls how much the rejection wick size influences the sweep score.
• Require Displacement Confirm: If enabled, signals only trigger after a follow-through candle breaks the sweep candle's reference.
• Volume MA Length / Min Volume: Sets the thresholds for the "Effort" score based on volume participation.

Display

• Show Historical Traces: Visualizes where previous liquidity levels were respected or swept.
• Show Sweep Markers: Plots flags on the chart when a sweep meets the scoring criteria.
• Max Active Boxes: Limits the number of visible pools to maintain a clean chart.

FAQ

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

What does a high sweep score mean? A higher score indicates the sweep event matched more criteria of the internal model, such as deep penetration followed by a strong rejection on high volume.

Why do some pools disappear? Pools are removed or "ended" when price breaks through them convincingly or if they exceed the maximum age defined in the script's logic to keep the canvas relevant.