Liquidation Reversal Signals

The Liquidation Reversal Signals indicator identifies high-probability trend reversals by detecting volume-driven liquidation spikes and confirming them with structural Supertrend shifts.

Usage

The tool is designed to highlight exhaustion points where aggressive forced liquidations likely mark the end of a trend leg.

• Liquidation Detection: Small circles appear above (short liquidations) or below (long liquidations) bars when volume z-scores exceed the set threshold.
• Trend Confirmation: When a Supertrend flip occurs within a specific window after a liquidation spike, a reversal arrow appears.
• Visual Context: The candles and background fills shift color (green for bullish, red for bearish) to indicate the dominant regime following a confirmed reversal.
• Warning System: An on-chart "No Volume" label will appear if the asset lacks sufficient volume data, preventing misinterpretation on illiquid symbols.

Details

The script utilizes Z-score normalization of up and down volume, requested from a lower timeframe, to identify statistical outliers. These outliers represent abnormal surges in directional volume often associated with "squeezes" or forced liquidations.

The indicator filters these spikes through a Supertrend calculation. A signal is only produced if the market structure (Supertrend) flips to the opposite direction within the defined Timeout Bars period. This ensures that the liquidation spike actually leads to a change in market regime rather than being a temporary pause in a strong trend.

Settings

Data

• Lower Timeframe: The timeframe used to request granular up/down volume data. Lower timeframes provide higher precision but may increase noise.

Z-Score

• Z Score Length: The lookback period used for calculating the mean and standard deviation of volume.
• Z-Score Threshold: The minimum statistical deviation required to trigger a liquidation spike event.

Detection

• Liquidation Timeout Bars: The maximum number of bars allowed between a liquidation spike and a Supertrend flip for the reversal signal to remain valid. Set to 0 to disable the timeout.

FAQ

How do I use the Liquidation Reversal Signals?

Add the tool to your chart and monitor for circles indicating volume extremes. Wait for the confirmation arrow and trend fill before considering a reversal trade.

What assets does this work best on?

This indicator is most effective on high-volume assets like major Forex pairs, large-cap Stocks, and Crypto, where volume-driven liquidations are more frequent.

How can I access this indicator?

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