AI Liquidation Levels

Overview

AI Liquidation Levels is a sophisticated institutional tool designed to identify critical price zones where significant market liquidity rests. These levels represent areas where a high concentration of stop-loss orders and liquidation triggers are likely clustered. By visualizing these zones, traders can anticipate high-volatility price reactions, such as sharp reversals (bounces) or aggressive breakouts (stop-runs).

The feature identifies potential liquidation zones based on volume clustering and historical pivot points. Depending on the visualization settings, these zones help traders identify where market participants may be forced out of their positions, providing opportunities to "hunt" stops or enter trades with institutional confluence.

Settings

Traders can fine-tune the detection and appearance of liquidation zones to match their strategy, whether they are looking for major macro levels or short-term liquidity pockets.

Detection Logic

Setting	Description
AI Liquidation Levels	Enables or disables the AI-powered liquidation level detection system.
Pivot Length	Sets the sensitivity for pivot detection. Lower values identify more frequent, short-term liquidity pockets; higher values focus on major structural levels.
Max Levels (Per Side)	Limits the number of active liquidation zones displayed for support and resistance (up to 4 per side).
Cluster Threshold (ATR)	Determines the distance used to merge nearby liquidation levels. Expressed as an ATR multiplier to maintain consistency across different assets.
Volume Decay Rate %	Controls how quickly the significance of older volume clusters diminishes. High decay emphasizes recent liquidity; 0% treats all historical volume equally.
Volume Lookback	Sets the number of bars used to analyze and normalize volume significance.

Visualization

Setting	Description
Adaptive Transparency	Dynamically adjusts zone opacity based on volume concentration. Levels with higher liquidity appear more opaque, while weaker levels are more transparent.
Dynamic Width	Adjusts the vertical thickness of the zone based on volume. Wider zones indicate a larger area of concentrated liquidity.
Support/Resistance Color	Customizes the base colors for bullish (support) and bearish (resistance) liquidation zones.

Best Practices & Usage

• Identify Reversal Points: Liquidation zones often act as "magnets" for price. Look for price to stall or bounce at highly opaque zones where the market has previously absorbed significant volume.

• Capitalize on Stop Runs: When price approaches a major resistance zone, a breakout through that zone often accelerates as short-sellers are liquidated. These "liquidation cascades" can be used to enter high-momentum breakout trades.

• Confluence with Volume Profile: Use AI Liquidation Levels alongside the AI Volume Profile to confirm if a liquidation zone aligns with a High Volume Node (HVN). The presence of both increases the probability of a significant price reaction.

• Adjusting for Volatility:

  • In Choppy Markets: Use a lower Pivot Length and higher Cluster Threshold to find broader zones where price might range.

  • In Trending Markets: Use a higher Volume Decay Rate to focus specifically on the most recent liquidity being built up in the current trend.

• Risk Management: Liquidation levels serve as excellent markers for placing your own stop-losses or take-profit targets. Aim to place stops outside of these identified zones to avoid being swept by institutional stop hunts.