Liquidation Levels [LuxAlgo]

19 oct 2023

The Liquidation Levels indicator aims at detecting and estimating potential price levels where large liquidation events may occur.

By analyzing liquidation Levels, traders can identify potential support & resistance levels, identify stop-loss levels, and gauge market sentiment and potential areas of price volatility.

🔶 USAGE



Liquidation refers to the process of forcibly closing a trader's leveraged positions in the market. It occurs when a trader's margin account can no longer support their open positions due to significant losses or a lack of sufficient margin to meet the maintenance margin requirements.

Liquidation events happen at all times and the script focuses on detecting the most significant ones. Bubbles will appear on the relevant price bar when larger trading activity has been detected. Larger bubbles represent more significant potential liquidation levels. The lines attached to the bubbles represent the liquidation zones at that price.



These liquidation levels are based on clusters of price points where highly leveraged traders open long or short positions. High leverage is identified as 100x, 50x, and 25x leverages used for both long and short positions. The script allows users to either remove or customize leverage levels.



Price generally heads towards zones or clusters of liquidity.



🔶 SETTINGS

🔹Liquidation Levels

• Reference Price: defines the base price in calculating liquidation levels.
  
• Volume Threshold: The volume threshold is the primary factor in detecting the significant trading activities that could potentially lead to liquidating leveraged positions.
  
• Volatility Threshold: The volatility threshold option is the secondary factor that aims at detecting significant movement in the underlying asset’s price with relatively lower trading activities that could potentially also lead to liquidating high-leveraged positions.
  
• Leverage Options: The leverage options are where the trader will set the desired leverage value and customize the potential liquidation level colors.
  
• Hide Liquidation Bubbles: Toggles the visibility of the bubbles.
  
• Hide Liquidation Levels: Toggles the visibility of the lines.
  

🔶 RELATED SCRIPTS

Liquidity-Sentiment-Profile
Buyside-Sellside-Liquidity