Liquidity heatmap
Shows where the largest clusters of market participants' stop-losses are located, which act as a magnet for big players👇
Short video lesson 8 minutes: ➡️Watch on YouTube ➡️Watch on VK
Heatmap designation on the chart
The heatmap shows exactly where and in what volume liquidity is hidden liquidity in the form of stop orders:
Purple stripes below the price - stop orders of those who are in long positions
Purple stripes above the price - stop orders of those who are in short positions
Bright purple stripes - the maximum concentration of stops, which acts as a strong magnet for the price
In the example we see places where small market participants have hidden their stop-losses small market participants - behind local lows. Purple zones below the current price show clusters of stop-losses of those who opened long positions.
This is exactly where the price will aim on the next decline to trigger those stop-losses.
After reaching these zones a reversal upward is likely, which can be used to open a long position.
In the example we see places where small market participants have hidden their stop-losses small market participants - behind local highs. Purple zones above the current price show clusters of stop-losses of those who opened short positions.
This is exactly where the price will aim on the next rise to trigger those stop-losses.
After reaching these zones a reversal downward is likely, which can be used to open a short position.
In the example we see bright purple line - this is the maximum concentration of liquidity, which will act as a strong magnet for the price.
When reaching the purple line a reversal is most likely.
Applying the heatmap in trading
Price always moves toward zones with high liquidity, here it is easier for big players to accumulate or realize positions - they move the price into these zones to "take" stops from weak traders.
Identify the nearest clusters of liquidity, to play proactively and trade in its direction
When the price takes all the liquidity, it reverses - use these zones to accumulate positions and take profits
When of liquidity a lot accumulates, a cascade effect is possible - the price will accelerate, taking stops until it collects everything - after that it will reverse
Do not place your stops in the liquidity cluster zone - otherwise you will become the liquidity
First of all, try the simplest a trading strategy with liquidity from the indicator developer
In the example we see how the price covered the accumulated liquidity and formed an entire "pool" of new of liquidity (longs' stops), which will act as a strong magnet for the price.
In the example - the same chart a few hours later. We see how after the acceleration the price reversed and went after the liquidity from below.
If you combine the analysis of liquidity with levels, you can with high probability accurately determine where the price will bounce off the level and where it will go.
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