Liquidity Sweep Filter

The Liquidity Sweep Filter tool identifies key market areas where stop-loss orders have been triggered, allowing traders to anticipate potential reversals and market structure shifts. By visualizing both major and minor liquidation events through an adaptive trend-filtering lens, it helps filter out noise and focus on high-probability zones.

Usage

The Liquidity Sweep Filter is designed to assist traders in identifying exhaustion points and trend continuations.

• Liquidity Detection: The indicator plots horizontal lines at swing highs and lows where liquidity resides. When price "sweeps" these levels, a label appears showing the volume associated with the liquidation.
• Major vs. Minor Sweeps: You can differentiate between significant liquidations and minor absorption events using the Major Sweep Threshold. Higher volume sweeps are often indicative of stronger price reactions.
• Trend Filtering: The tool automatically filters sweeps based on the current market direction. In an uptrend, it focuses on sweeps of lows (bullish liquidations), whereas in a downtrend, it focuses on sweeps of highs (bearish liquidations).
• Volume Profile: Use the integrated volume profile overlay to identify price levels with high trading activity (Point of Control) within the current trend cycle.

Details

The script detects liquidity events by tracking pivot points where traders typically place stop-loss orders. It evaluates price action relative to a volatility-adjusted basis (calculated using SMA and EMA).

Liquidity levels are dynamically drawn and extended until they are either mitigated by price or the trend shifts. The transparency of these levels is tied to the relative volume at that pivot; darker lines represent higher relative volume, indicating more significant liquidity pools. The trend filter ensures that only "counter-trend" liquidity grabs are highlighted, which are often the precursors to trend continuations or local reversals.

Settings

Trend Settings

• Length: The lookback period for trend and volatility calculations.
• Multiplier: Adjusts the width of the trend bands, affecting sensitivity to price fluctuations.
• Major Sweep Threshold: A value between 0-100 that defines the volume intensity required for a sweep to be classified as "Major."
• Show Major/Minor Liquidations: Toggles the visibility of labels for different sweep intensities.

Profile Settings

• Show Volume Profile: Enables the horizontal volume distribution display.
• Resolution: Determines the number of price buckets used in the volume profile.
• Scale: Controls the horizontal width of the profile on the chart.

Appearance Settings

• Bullish/Bearish Color: Sets the colors for uptrends, downtrends, and their respective liquidity events.
• Profile Color: Customizes the color used for the volume profile visualization.

FAQ

How do I interpret the labels on the chart?

The labels represent the volume of liquidity "swept" at a specific level. Bullish labels (upward-pointing) indicate that sell-stops were hit before a potential move up, while bearish labels (downward-pointing) indicate buy-stops were triggered before a potential move down.

What is the "Major Sweep Threshold" used for?

It allows you to filter out small, insignificant price wicks. By increasing this value, the indicator will only highlight sweeps that occurred with significantly high relative volume.

How can I get access to the Liquidity Sweep Filter?

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