Popular Science - "How to Understand the Liquidation Map"

The liquidation map or liquidation chart (also known as the liq map) provides a visual representation of liquidations in the futures crypto market. It only shows predicted liquidations based on previous price movements.
Traders trading on unregulated cryptocurrency derivatives exchanges are constantly exposed to additional risks, namely liquidation (margin call) risk. When a trader's liquidation price is triggered, their position will be forcibly closed by the exchange's risk engine.
When a small number of positions are liquidated, the impact on the market is minimal. However, if thousands of positions have liquidation prices close to each other, these liquidations can significantly influence market prices. More importantly, when certain positions are liquidated, market orders for buying and selling at market prices can drive prices rapidly, causing more nearby positions to be liquidated, creating a terrifying "chain reaction," leading to large price fluctuations (this is also a favored entry method for institutions, as releasing large liquidity in a short period can meet the demand for big institutional orders).
Different combinations of leverage and timeframes depict several liquidation clusters. The denser and higher the liquidation cluster, the greater its impact on price behavior when it occurs.

Using the liquidation map, you can:

- Breakout trading
- Profitable scalp trading
- Precisely place stop-loss points to prevent being stopped out
- Capture profits in high liquidity areas
- Optimize execution of large positions, find liquidity, and avoid unnecessary slippage
- Understand when prices will fluctuate rapidly and then recede

What do the two axes represent?

The X-axis represents the spot price, and the Y-axis represents the relative strength of liquidations.
The liquidation map does not display the exact number of contracts pending liquidation or the precise value of liquidated contracts. The bars on the map represent the importance of each liquidation cluster relative to nearby clusters, i.e., the intensity.
Therefore, the liquidation map shows how much influence the price reaching a certain level will have. Higher "liquidation bars" indicate that the price will react more strongly due to liquidity waves once it reaches those levels.

Note: Different colors are merely used to distinguish different liquidation clusters and do not provide additional information.
Liquidation maps come in various forms, each corresponding to different timeframes and leverage multiples. Different leverage and timeframe combinations generate different liquidation clusters. The denser and higher the clusters, the greater their impact on price behavior when reached.