Liquidation MapChart
Indicator Introduction
How to Understand Liquidation Map
The liquidation map or liquidation heatmap (also known as liq map) provides a visual chart of trader liquidations in the futures crypto market. It only shows liquidations that are predicted to occur based on previous price movements. Traders trading on unregulated cryptocurrency derivative exchanges are constantly exposed to additional risks, namely liquidation (blow-up) risk. When a trader's position liquidation price is triggered, their position will be forcibly closed by the exchange's risk engine. When a small number of positions are liquidated, the impact on the market is small, but if thousands of positions have liquidation prices close to each other, if these orders are liquidated, the impact on market prices is huge. More importantly, when certain positions are liquidated, the resulting market buy and sell orders will push prices to move quickly, causing more nearby positions to be liquidated, forming a terrible 'chain reaction', leading to large price fluctuations (this is also a way that institutions like to use for entry, because releasing huge liquidity in a short time can meet the entry needs of large institutional orders). Different combinations of leverage and time frames depict several liquidation clusters. The denser and higher the liquidation cluster, the greater the impact on price behavior when it arrives.
Using the liquidation map you can:
- Breakout trading - Profitable scalping trading - Precisely place stop-loss points to prevent stop-loss hunting - Profit in high-liquidity areas - Optimize large position execution, find liquidity, avoid unnecessary slippage - Understand when prices will fluctuate and fade quickly
What do the two coordinate axes represent?
The X-axis represents the spot price, and the Y-axis represents the relative intensity of liquidation. The liquidation chart does not show the exact number of contracts to be liquidated or the exact value of liquidated contracts. The bars on the liquidation chart actually show the importance of each liquidation cluster relative to nearby liquidation clusters, i.e., intensity. Therefore, the liquidation chart shows to what extent the spot price will be affected when it reaches a certain position. Higher 'liquidation bars' indicate that after the price reaches that point, there will be a stronger reaction due to the liquidity wave. Note: Different colors are only for users to distinguish different liquidation clusters and do not provide additional information. The liquidation chart exists in different forms, each corresponding to different combinations of time frames and different leverage multiples. Different combinations of leverage multiples and time frames will generate different liquidation clusters. The denser and higher the liquidation cluster, the greater the impact on price behavior when the price reaches these positions.