Liquidity Levels MTF - Sonarlab

The Liquidity Levels MTF - Sonarlab indicator identifies key price levels where market liquidity is concentrated using multi-timeframe pivot point analysis. This tool helps traders visualize potential "magnets" for price action by highlighting significant highs and lows that haven't been breached, providing clarity on where buy-side or sell-side liquidity resides.

Usage

The Usage section describes how the script can be used to identify areas of interest. Traders use these levels to anticipate where price might reverse or accelerate.

• Identifying Liquidity Pools: High and low pivot points represent areas where stop-loss orders or breakout orders are often clustered. The indicator marks these as horizontal levels (lines or boxes) until they are mitigated.
• Multi-Timeframe Analysis: By enabling the Higher Timeframe (HTF) option, users can see major liquidity levels from daily or weekly charts while trading on lower timeframes like the 15-minute or 1-hour. This helps in aligning local price action with broader market structure.
• Mitigation Tracking: When price reaches a liquidity level, it is "mitigated." The script can be set to either remove these levels instantly to clean up the chart or keep them visible in a faded style to show historical areas of interest.

Details

The script utilizes the ta.pivothigh() and ta.pivotlow() functions to detect structural turning points. A level is established once a specific number of bars to the right (confirmation bars) fail to exceed the pivot point.

• Detection: The "Left Bars" and "Right Bars" settings determine the significance of the pivot. A higher value results in more significant, longer-term liquidity levels, while lower values capture short-term fluctuations.
• Extension: Levels can be extended to the current bar or to the maximum right of the chart, ensuring that active liquidity zones remain visible as price approaches them.
• Box vs. Line: Users can choose to display levels as simple lines or as boxes. The boxes typically encapsulate the area between the pivot wick and the candle body, providing a "zone" rather than a single price point.

Settings

TimeFrame Settings

• Liquidity Levels: Toggles the display of liquidity levels based on the current chart timeframe.
• Higher Timeframe: Enables the display of liquidity levels from a secondary, higher timeframe.

Liquidity Levels

• Left Bars: The number of bars required to the left of a high or low to qualify it as a potential pivot.
• Right Bars: The number of bars required to the right to confirm a pivot point.

Mitigation Settings

• Mitigated: Toggles whether the script reacts when price touches a level.
• Mitigation Options: Choose "Remove" to delete the level once hit, or "Show" to keep a historical record on the chart.
• Candle Type: Determines if mitigation is triggered by a candle wick (touch) or a candle close (confirmation) through the level.

Display Styles

• Display Style: Switches between "Lines" or "Boxes" for level visualization.
• Extension Options: Determines how far levels extend (Short, Current, or Max Right).
• Display Limit: Limits the total number of levels shown on the chart to prevent clutter.

FAQ

How do I adjust the sensitivity of the liquidity levels? You can modify the "Left Bars" and "Right Bars" settings in the Liquidity Levels group. Increasing these values will filter out minor fluctuations and only show major structural liquidity.

What is the difference between "Close" and "Wick" mitigation? If set to "Wick," a level is considered mitigated as soon as price touches it. if set to "Close," the level remains active until a candle body actually closes beyond the line.

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.