Liquidity Depth [AlgoAlpha]OVERVIEW
This script visualizes market liquidity by identifying key price levels where significant volume has transacted. It highlights zones of high buying and selling interest, helping traders understand where liquidity is accumulating and how price may respond to these areas. By dynamically tracking volume at highs and lows, the script builds a real-time liquidity profile, making it a powerful tool for identifying potential support and resistance levels.
CONCEPTS
Liquidity depth analysis helps traders determine how price interacts with supply and demand at different levels. The script processes historical volume data to distinguish between high-liquidity and low-liquidity zones. It assigns transparency levels to plotted lines , ensuring that more relevant liquidity areas stand out visually. The script adds a profile to show the depth of liquidity (derived from historical volume data) for levels above and below the current price
FEATURES
Liquidity Levels: Tracks liquidity levels based on volume concentration at price high and lows.
Volume-Based Transparency: More significant liquidity levels are displayed with higher visibility, showing their significance.
Interpolation: interpolates the bullish and bearish liquidity depth at a user defined range away from the price, helping in comparing the liquidity amounts between bullish and bearish.
Depth Profile: Allows traders to visualize depth of liquidity in a more quantitative and clearer way than the liquidity levels/list]
USAGE
This indicator is best used to track liquidity levels and potential price reaction areas. Traders can adjust the Liquidity Lookback setting to analyze past liquidity levels over different historical periods. The Profile Resolution setting controls the granularity of liquidity depth visualization, with higher values providing more detail. The script can be applied across different timeframes, from intraday scalping to swing trading analysis. The plotted liquidity zones provide traders with insights into where price may encounter strong support, resistance, or potential liquidity-driven reversals.
Liquidityheatmap
Open Liquidity Heatmap [BigBeluga]Open Liquidity Heatmap is an indicator designed to display accumulated resting liquidity on the chart.
Unlike any other liquidity heatmap, this aims to accumulate liquidity at specific levels that build up over time, showing larger areas of liquidity.
🔶 FEATURES
The indicator includes the following settings:
Lookback : Used to determine the range calculation of the heatmap.
Leverage : Leverage of the liquidation (Counted as % in price, Example: 4.5 will return a distance from price of 4.5%, indicating any possible resting liquidity in this range).
Levels : Amount of levels to display (Each level is counted as liquidity resting on the chart; fewer levels will return a bigger area of liquidity sitting on the chart).
Mode : Apply a color gradient from the minimum liquidation to the maximum liquidity level. Set the maximum color gradient value (Counted as volume).
Offset : Automatically determine the offset range of the Volume Profiles. Manual offset of the Volume Profiles.
🔶 CALCULATION
for i = 0 to step - 1
float plotter = na
switch i
0 =>
plotter := hs
=>
plotter := hs - diff * ( i )
cls.hm.gnL(plotter)
cls.vp.put(plotter, 0)
We calculate levels like a normal volume profile with steps, from the highest point within the lookback to the lowest one. Each level will contain the corresponding amount of volume that the candle has closed in that range.
As we can see in the image above, we add liquidity each time the distance in % from price is between two levels.
Unlike many liquidity indicators that provide a single candle liquidity heatmap, this aims to add up liquidity (volume) in already present levels.
This can be extremely useful to see which levels are likely to be more liquid and tend to get a bigger reaction to the price.
Imagine it like a range of levels that each time price revisits that area, a new position area is added; we add volume in that area each time price visits that zone. Liquidity builds up in those zones, causing a bigger reaction to the price once the price visits it.
This indicator is not the same as a single candle heatmap like many others. What is a single candle heatmap?
A single candle heatmap is when a level is created on every new candle, coloring the level based on the total volume of it.
This indicator, on the contrary, aims to provide a more specific use by adding up liquidity each time price visits it.
🔶 BASIC DEMOSTRATION
This is a basic demonstration of how we can spot high liquidity points overall using confluence:
We see the POC of the liquidation in a low volume area of the normal volume profile adding up as confluence.
Resistance from the POC Volume Profile suggesting price will go lower.
Major long open liquidity down.
As we can see, price takes out all the long liquidity and right after pumping, indicating that all the major liquidity got taken out.
Some key note to take is that a POC in the liquidation heatmap in a low volume area of the normal Volume Profile add confluence of a possible big reaction in that zone.
In the forex market, we suggest to use a low distance from price (Leverage) while in a crypto market you can use the one that fit the best the current timeframe.
🔶 CONCLUSION
This indicator aims to show open resting liquidity that had built up over time, showing the most amount of liquidation in specific areas in an aggregated way unlike many liquidation heatmap indicators that show single-level liquidation.
🔶 RELATED SCRIPT
