Liquidity Radar by DGT

Liquidity Radar is an advanced indicator designed to uncover and visualize critical liquidity zones on the price chart. These zones mark areas where stop orders and limit orders are densely concentrated—price levels where large-scale liquidation events are more likely to occur. Such areas are often targeted by institutional players to spark volatility or to optimize trade execution.

The indicator dynamically draws horizontal levels that reflect real-time liquidity buildup based on volume and price activity. When multiple liquidation levels cluster near the same price, overlapping lines highlight zones of elevated liquidity—helping traders identify potential hotspots for price reactions, reversals, or volatility spikes.

KEY FEATURES

⯌ Magnet Zones

Clusters of liquidation levels may act as magnets for price, pulling market movement toward them. Traders often use these zones to forecast directional bias and identify high-probability setups.

⯌ Support/Resistance Zones

Densely packed liquidity often behaves as dynamic support or resistance. These zones can provide major players with optimal entry or exit points, potentially leading to sharp reactions or market reversals.

⯌ Rapid Move Zones

Areas with sparse liquidity levels often experience faster price movement, as fewer resting orders are available to absorb aggressive taker orders. These zones can lead to quick price sweeps and momentum surges.

INSIGHTS

What Happens After Price Reaches a High Liquidity Zone?

Liquidity is "Grabbed"

These zones are typically filled with stop-losses or resting orders. When price reaches them, large volumes are executed — often suddenly. This is known as a liquidity grab or stop hunt.

Increased Volatility

The execution of clustered orders often triggers bursts of volatility. This can result in large wicks, rapid price movements, or deceptive “fakeouts” around the zone.

Price Reaction Scenarios

1. Stall or Consolidation: After liquidity is grabbed, price may pause or range, especially if market participants are indecisive.
   
2. Reversal: If the liquidity grab flushes out weak hands, price may reverse sharply — often where institutional players are already positioned in the opposite direction.
   
3. Continuation: Sometimes, the zone acts as a launchpad — price consumes the liquidity and continues strongly in the same direction.
   

What Happens When Price Is Between Liquidity Zones?

Faster Price Moves

In areas with fewer clustered liquidity levels, price often moves quicker due to fewer resting orders absorbing aggressive taker orders, enabling market orders to push price rapidly through these zones.

Higher Probability of Market (Taker) Orders

Sparse liquidity encourages taker orders, which “take” liquidity instantly, causing sharp and sometimes unpredictable price swings.

Reduced Support or Resistance

The lack of dense liquidity means fewer natural price barriers, allowing price to sweep through these zones with less friction until it nears the next liquidity cluster.

Increased Volatility and Potential Whipsaws

Rapid movement in low liquidity zones can trigger stop losses or cause fakeouts, resulting in sudden volatility and quick reversals.

Opportunity for Breakouts or Trend Acceleration

Price breaking from a liquidity zone into a sparse area may gain momentum quickly, leading to strong directional moves or trend continuation.

Liquidity zones aren’t just price targets — they’re high-stakes decision points. Once tapped, they often serve as temporary barriers where price may reverse, stall, or continue, depending on the prevailing order flow and participant intent. In leveraged markets, liquidations play a crucial role in shaping price behavior and positioning. The Liquidity Levels indicator helps traders spot where these impactful moments are most likely to occur — enhancing both strategic edge and decision-making confidence.

LIMITATIONS

Due to a technical limitation in Pine Script, a maximum of 500 horizontal levels can be drawn. As a result, some historical liquidity levels from earlier bars may not appear on the chart.

DISCLAIMER

This script is intended for informational and educational purposes only. It does not constitute financial, investment, or trading advice. All trading decisions made based on its output are solely the responsibility of the user.