Liquidations Zones

The Liquidations Zones indicator identifies potential liquidation zones based on common leverage levels to help traders visualize where market participants may be forced to exit positions. By calculating percentage distances from recent pivot points, the tool highlights price areas corresponding to 10x, 25x, 50x, and 100x leverage risks, providing insight into potential support, resistance, and volatility clusters.

Usage

The Liquidations Zones tool can be used to anticipate market reactions when price approaches levels where high-leverage traders are likely to be liquidated.

• Leverage Zone Detection: The tool plots color-coded boxes representing different leverage tiers. For example, a 1% move from a pivot high can trigger 100x short liquidations, while a 4% move affects 25x positions.
• Liquidation & Volume Tracking: When price enters a zone, the indicator tracks the specific volume types associated with that movement. For long liquidations (bottom zones), it sums bearish candle volume; for short liquidations (top zones), it sums bullish candle volume.
• Heat Map Mode: Enabling the Heat Map mode transforms the visualization into a density map, highlighting areas where orders and stop-losses are most likely clustered. This mode also tracks the highest and lowest prices over the last 100 bars to provide broader context on market range and volume pressure.
• Zone Interaction: Once a zone is "crossed" or mitigated by price, it changes appearance (gray/dotted) to indicate that the potential liquidation event for that specific pivot has occurred.

Details

The indicator relies on pivot highs and lows to establish the "entry price" of theoretical leveraged positions. From these pivots, it calculates the liquidation price based on standard exchange mechanics:

• 100x: 1% distance from pivot.
• 50x: 2% distance from pivot.
• 25x: 4% distance from pivot.
• 10x: 10% distance from pivot.

The volume calculation is specific to the "liquidation direction." Buy volume is aggregated from the most recent pivot low, while sell volume is aggregated from the most recent pivot high. This helps traders gauge if a move into a liquidation zone is backed by significant participation or if it is a low-volume liquidity grab.

Settings

• Length: Sets the lookback period for detecting the pivot highs and lows used to anchor the liquidation zones.
• Extend: Determines the horizontal length (number of bars) that the zones and volume labels extend into the future.
• Liquidation Zones (10X, 25X, 50X, 100X): Toggles the visibility of specific leverage tiers on the chart.
• Display HeatMap: Switches the visual style from distinct labeled boxes to a semi-transparent heatmap that emphasizes liquidity clusters.

FAQ

How do I interpret the volume labels next to the zones? The labels show the accumulated volume since the pivot was formed. "Sell Volume" in a top zone represents the volume of bearish candles, suggesting how much selling pressure is present as price approaches short liquidation levels.

What happens when a zone turns gray? A gray, dotted zone indicates that price has already penetrated that level, potentially triggering the liquidations associated with that specific price point and pivot.

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