Liquidity Heatmap [BigBeluga] — Indicator by BigBeluga — TradingView (2024)

Aug 24, 2023The Liquidity Heatmap is an indicator designed to spot possible resting liquidity or potential stop loss using volume or Open interest.

The Open interest is the total number of outstanding derivative contracts for an asset—such as options or futures—that have not been settled. Open interest keeps track of every open position in a particular contract rather than tracking the total volume traded.

The Volume is the total quantity of shares or contracts traded for the current timeframe.

🔶 HOW IT WORKS
Based on the user choice between Volume or OI, the idea is the same for both.
On each candle, we add the data (volume or OI) below or above (long or short) that should be the hypothetical liquidation levels; More color of the liquidity level = more reaction when the price goes through it.

Gradient color is calculated between an average of 2 points that the user can select. For example: 500, and the script will take the average of the highest data between 500 and 250 (half of the user's choice), and the gradient will be based on that.

If we take volume as an example, a big volume spike will mean a lot of long or short activity in that candle. A liquidity level will be displayed below/above the set leverage (4.5 = 20x leverage as an example) so when the price revisits that zone, all the 20x leverage should be liquidated.

Huge volume = a lot of activity
Huge OI = a lot of positions opened

More volume / OI will result in a stronger color that will generate a stronger reaction.

🔶 ROUTE
Here's an example of a route for long liquidity:

Enable the filter = consider only green candles.
Set the leverage to 4.5 (20x).
Choose Data = Volume.
Process:

A green candle is formed.
A liquidity level is established.
The level is placed below to simulate the 20x leverage.
Color is applied, considering the average volume within the chosen area.
Route completed.

🔶 FEATURE
Possibility to change the color of both long and short liquidity
Manual opacity value
Manual opacity average
Leverage

Autopilot - set a good average automatically of the opacity value
Enable both long or short liquidity visualization
Filtering - grab only red/green candle of the corresponding side or grab every candle

Data - nzVolume - Volume - nzOI - OI

🔶 TIPS
Since the limit of the line is 500, it's best to plot 2 scripts: one with only long and another with only short.

🔶 CONCLUSION
The liquidity levels are an interesting way to think about possible levels, and those are not real levels.