Trade Setup Analysis — How This Liquidity Sets Up Your Trade
How to Read This Liquidation Heatmap
What This Chart Shows
The Liquidation Heatmap shows where leveraged positions would get force-closed if price reaches certain levels, overlaid on a live candlestick chart. Unlike the Liquidation Map (which shows total exposure as bars), the heatmap shows how liquidation density is distributed across both price and time — so you can see how liquidity has evolved and which levels have already been consumed by price.
The Two Axes
- X-axis (horizontal): Time. The chart shows candlestick price action over the selected timeframe (12h to 3m). As you move right, you see the most recent data.
- Y-axis (vertical): Price levels. The heatmap extends above and below the current price, showing where liquidation clusters sit at each point in time.
The Color Gradient
Liquidity density is shown as a color gradient overlaid on the chart:
- Sky blue (below price): Long liquidation clusters. Brighter blue = thicker long liquidity at that price level. If price drops into a bright blue zone, long positions get force-sold, accelerating the move down.
- Magenta (above price): Short liquidation clusters. Brighter magenta = thicker short liquidity at that price level. If price rises into a bright magenta zone, short positions get force-bought, accelerating the move up.
- Dark void: Areas where price has already swept through and consumed the liquidity. These levels have been cleared — the forced flow has already triggered and the fuel is spent.
The brighter the color, the thicker the liquidity. Think of bright zones as magnets — price tends to be drawn toward them because that is where forced flow would accelerate.
The Wipe Effect
As price moves through a liquidation cluster, those positions get liquidated. The heatmap shows this as a fading or "wiping" of the color — the liquidity has been consumed. You can see the trail of where price has already been, which helps you distinguish between fresh liquidity (bright, untouched) and spent liquidity (dark, already swept).
This is the key difference from the Liquidation Map tab: the heatmap shows what has been consumed, while the bar chart shows total estimated exposure regardless of whether price has reached it.
The Candlestick Chart
The candlesticks show actual price action for the selected timeframe. The heatmap is overlaid on the candles so you can see how price has interacted with liquidation zones. Key things to watch:
- Candles that push into bright zones and reverse — price tested the liquidity and bounced.
- Candles that push into bright zones and continue — the cascade has triggered, fuel is being consumed.
- Gaps between candle wicks and bright zones — price has not yet reached the liquidity, so it remains as a future magnet.
The Liquidation Dots
Small dots on the chart mark actual liquidation prints (when available from exchange APIs):
- Blue dots: Long positions that were liquidated — forced sells.
- Magenta dots: Short positions that were liquidated — forced buys.
These confirm where real liquidations have occurred, as opposed to the estimated heatmap which shows where they would occur.
How to Use It — Trade Setups
- Bright zone below price: Downside target. Price may gravitate toward it. If reached, expect acceleration downward through the zone, then a reversal once the fuel is spent.
- Bright zone above price: Upside target. A breakout may accelerate into this zone before reversing.
- Dark void below price: Support has been swept — the liquidity is gone. Price may not find strong buying here again unless new positions build up.
- Bright zone with no price interaction yet: Fresh liquidity. This is a future magnet that has not been tested. Higher probability of being reached.
- Multiple bright zones stacked: A cascade path. If the nearest zone is hit, the resulting move may chain into the next zone below/above.
Choosing a Timeframe
- 12h–24h: Short-term trading. Shows liquidation zones from the last day. Best for intraday setups and identifying near-term magnets.
- 48h–3d: Swing trading. Shows zones built over a few days. Balances recent data with enough history to see patterns.
- 1w–2w: Position trading. Shows the broader liquidation landscape. Useful for identifying major liquidity pools that could attract price over a week or more.
- 1m–3m: Macro view. Shows long-term liquidation structure. Useful for identifying where large clusters have built up over extended periods.
What This Chart Does NOT Do
- It does not predict price direction. It shows where forced flow would accelerate if price gets there.
- It is not a real-time order book. Values are estimated from OI, leverage tiers, and candle data.
- The wipe effect shows estimated consumption — actual liquidations may differ if positions were closed manually before liquidation.
- It does not account for hedged positions, cross-exchange arbitrage, or OTC desks that do not appear in public data.
- Smaller timeframes show less data and may appear noisier. Use larger timeframes for structural analysis.
Stack With Other Signals
The Heatmap is strongest when combined with:
- Liquidation Map tab: Shows the same data as a bar chart with exact dollar values and cumulative lines. Use it to quantify what the heatmap shows visually.
- Max Pain Scanner tab: Scans the top 100 assets by volume to find which coins have the most concentrated liquidation exposure. Use it to find opportunities across the market, then switch to the heatmap for detailed analysis.
- Funding Rate: High positive funding + bright downside zone = longs are crowded and vulnerable. Negative funding + bright upside zone = shorts are crowded.
- Price Structure: Bright zones that align with support/resistance, prior swing highs/lows, or key moving averages are higher-probability targets.
- Volume: High-volume candles pushing into bright zones confirm strong participation. Low-volume candles reaching for bright zones may lack the momentum to trigger a cascade.
Discipline is measured by adhering to the rules and wins, not profit. Use this tool to manage risk, not to chase moves.