What is a Liquidity Heatmap?

A liquidity heatmap is a specialized visualization tool that displays the concentration of orders and liquidity at different price levels in the market. It uses color gradients to represent the density of orders, helping traders identify significant support and resistance levels.

Key Features

Visual Elements

• Color intensity shows liquidity concentration
• Price levels on vertical axis
• Time progression on horizontal axis
• Real-time order book visualization

Trading Applications

• Identify liquidity clusters
• Spot potential price barriers
• Track order flow patterns
• Predict potential price movements

Reading the Heatmap

Color Interpretation

• Darker colors: Higher liquidity concentration
• Lighter colors: Lower liquidity levels
• Color transitions: Liquidity distribution changes

Pattern Analysis

• Horizontal bands: Strong support/resistance
• Vertical movements: Price level shifts
• Clusters: Areas of high trading interest

Related Terms

• Heatmap
• Market Depth
• Order Book
• Liquidity