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Liquidation levels thread.
Sometimes I post charts with Liquidation levels and I've gotten a lot of questions about it.
It's in my humble opinion one of the most useful tools I've ever used so let's dive into how it works.
1/start
Sometimes I post charts with Liquidation levels and I've gotten a lot of questions about it.
It's in my humble opinion one of the most useful tools I've ever used so let's dive into how it works.
1/start
Markets seek liquidity.
That's the premise we start with.
This is simply how the market works.
Let's say you want to sell but no one's buying. Then price will have to drop until there is someone willing to buy.
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That's the premise we start with.
This is simply how the market works.
Let's say you want to sell but no one's buying. Then price will have to drop until there is someone willing to buy.
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But levels of high liquidity are often very crucial turning points
This is usually because of whales.
We all know it's mostly(!) whales that create the big moves.
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This is usually because of whales.
We all know it's mostly(!) whales that create the big moves.
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But for a whale it's not that easy to get into a position.
So they try to push the market in a specific direction to trigger stop losses or liquidations, which represent a lot of liquidity.
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So they try to push the market in a specific direction to trigger stop losses or liquidations, which represent a lot of liquidity.
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E.G.
When lots of people are short, but price keeps grinding up, those shorts will eventually get squeezed.
Shorting is basically selling, so when shorts puke they have to buy back --> lots of buy pressure --> lots of liquidity.
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When lots of people are short, but price keeps grinding up, those shorts will eventually get squeezed.
Shorting is basically selling, so when shorts puke they have to buy back --> lots of buy pressure --> lots of liquidity.
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So now the obvious question is: "how do we know where those levels of high liquidity are located?".
There are many different ways you can try and figure this out, but one way is to use the liquidation levels tool.
Let's talk about it.
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There are many different ways you can try and figure this out, but one way is to use the liquidation levels tool.
Let's talk about it.
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First of all let me guide you through how it works.
This is what the tool looks like.
It shows you all the closest liquidation levels with a value of 10M or higher and a 4 day look back period.
You can also choose to only show 15M+ or 20M+.
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This is what the tool looks like.
It shows you all the closest liquidation levels with a value of 10M or higher and a 4 day look back period.
You can also choose to only show 15M+ or 20M+.
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On the right you can see the colour coding.
The tool basically shows highly accurate estimations based on real market orders.
These estimations are as if traders were using 25, 50 or a 100x leverage.
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The tool basically shows highly accurate estimations based on real market orders.
These estimations are as if traders were using 25, 50 or a 100x leverage.
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These levels are static.
Keep that in mind because a very old level might not be relevant anymore.
On the chart you can also use the liq levels and get more history.
It's limited to 40 open levels because of a Tradingview limitation.
But 40 is more than enough to work with.
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Keep that in mind because a very old level might not be relevant anymore.
On the chart you can also use the liq levels and get more history.
It's limited to 40 open levels because of a Tradingview limitation.
But 40 is more than enough to work with.
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So how are these levels useful?
They give you an idea of where the bulk of the liquidity is located.
Big clusters with a high value are the most relevant.
They are often key turning points.
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They give you an idea of where the bulk of the liquidity is located.
Big clusters with a high value are the most relevant.
They are often key turning points.
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When price reaches such clusters you can assume that price will either (1) reverse or (2) at least stall.
Thus the two most practical ways to use this tool is for choosing targets or entering a trade.
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Thus the two most practical ways to use this tool is for choosing targets or entering a trade.
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Let's say you want to enter a long, you're looking at a support level to enter.
If your entry level has big liquidation levels, then there is a good chance that price will indeed bounce there.
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If your entry level has big liquidation levels, then there is a good chance that price will indeed bounce there.
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The following should be common sense, but obviously not every liq level is going to give a significant reaction.
I don't recommend trading based on these levels alone, but they can serve as valuable confluence.
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I don't recommend trading based on these levels alone, but they can serve as valuable confluence.
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You can also use the liquidation levels on the chart, but if you turn them all on it can get a bit chaotic.
Just play around with it and see what works best for you.
A few trader friends of mine and I feel like the 100x levels often give the best reactions.
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Just play around with it and see what works best for you.
A few trader friends of mine and I feel like the 100x levels often give the best reactions.
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A few more tips...
From personal experience I can say that this tool works sublime in a range, it's less effective when the market is trending.
It's not because you see a big cluster that price WILL go there.
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From personal experience I can say that this tool works sublime in a range, it's less effective when the market is trending. It's not because you see a big cluster that price WILL go there.15/
Turn on the liquidations indicator.
In this example you see that actual liquidations happen when the estimated liq level are hit.
This way you can filter the useful levels from less relevant liq levels.
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In this example you see that actual liquidations happen when the estimated liq level are hit.
This way you can filter the useful levels from less relevant liq levels.
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This type of alpha doesn't come for free of course.
It's a premium tool from HyblockCapital.
You can create a free account though, and if you ever decide to buy the premium version I suggest you sign up with this link so you get a discount:
https://hyblockcapital.com/referer/JUC0KL
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It's a premium tool from HyblockCapital.
You can create a free account though, and if you ever decide to buy the premium version I suggest you sign up with this link so you get a discount:
https://hyblockcapital.com/referer/JUC0KL
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As always, non of this is financial advise bla bla.
If you have any questions feel free to ask them, I'll keep checking the comments.
Cheers.
18/fin
If you have any questions feel free to ask them, I'll keep checking the comments.
Cheers.
18/fin
