Dynamic Liquidity HeatMap Profile

The Dynamic Liquidity HeatMap Profile indicator is a smart-flow tracking tool that maps potential stop-loss clusters and resting limit orders to visualize probable liquidity pools. Unlike traditional volume profiles that rely on executed trades, this tool projects areas where traders may be positioned or trapped, identifying zones where institutional participants are likely to seek liquidity.

Usage

The indicator can be used to identify high-probability reversal or expansion zones by highlighting where liquidity is concentrated.

• Liquidity Sweeps: Look for price action moving toward dense heatmap zones; these often result in "wick raids" where liquidity is captured before a move in the opposite direction.
• Magnet Effect: The orange Point of Control (POC) represents the highest concentration of liquidity and often acts as a price magnet.
• Trend Filtering: Heavy liquidity blocks residing above the current price can act as overhead resistance, while significant blocks below can act as support.
• Breakout Confirmation: Use the profile to see if a breakout is moving toward a "liquidity vacuum" or into a thick wall of resting orders.

Details

The script functions by scanning recent price swings and volatility to estimate the positioning of buy-stops (above swing highs) and sell-stops (below swing lows).

• Dynamic Scanning: It calculates liquidity based on recent swing behavior combined with volume-weighted expansion.
• Auto-Cleaning: The engine automatically removes liquidity levels that have been invalidated or "mitigated" by price action, ensuring the heatmap remains relevant to current market conditions.
• Dual-Side Visualization: The tool separates liquidity into buy-side (typically below price) and sell-side (typically above price) to provide a clear view of market imbalance.

Settings

• Calculated Bars: Sets the lookback window for the liquidity calculation.
• Profile: Toggles the visibility of the horizontal volume profile histogram on the right side of the chart.
• Resolution: Adjusts the number of bins used to calculate the vertical distribution of liquidity.
• Sell Liquidity: Customizes the color for liquidity clusters located above the price.
• Buy Liquidity: Customizes the color for liquidity clusters located below the price.
• Max Point Liquidity (POC): Toggles and sets the color for the level with the highest liquidity concentration.

FAQ

How do I interpret the colors on the heatmap?

Generally, blue or red zones above price indicate sell-side liquidity (short stops), while lime or green zones below indicate buy-side liquidity (long stops). Orange highlights the most significant concentration (POC).

Does this show actual limit orders from the order book?

No, this indicator uses historical price action, volatility, and volume to estimate "probable" liquidity zones where stop-losses and limit orders are likely to be clustered based on technical structures.

How do I access Dynamic Liquidity HeatMap Profile?

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