Liquidations Data on TradingView

How to Use Liquidations Data on TradingView: A Guide for Crypto Traders

If you trade crypto derivatives, understanding market liquidations is essential. A recent tutorial on the TradingView YouTube channel breaks down the Liquidations Indicator, explaining what it is, how to set it up, and how to use it to spot potential market reversals.

Here is a summary of the key points to help you integrate this tool into your analysis.

What Are Liquidations?

Liquidations occur when a leveraged position is forcibly closed by the exchange because the trader’s margin can no longer cover the position.

• Buy-Side Liquidation (Green Bars): Short positions are forced to close by buying back the asset. This often happens during price spikes.
• Sell-Side Liquidation (Red Bars): Long positions are forced to close by selling the asset. This often happens during sharp price drops.

How to Add the Indicator

1. Open your chart (e.g., Bitcoin Perpetual Contract).
2. Click on the Indicators, Metrics & Strategies icon at the top.
3. Search for “Liquidations” in the technicals tab.
4. Select the indicator to add it to the bottom panel of your chart.

Note: This indicator currently supports data from major exchanges like Binance, BitMEX, Bybit, and Deribit.

Interpreting the Data

The indicator displays vertical bars representing the volume of liquidations in USD.

• Market Exhaustion: A large cluster of liquidations often signals that a price move is running out of fuel. For example, a massive spike in red (long liquidations) might indicate a “capitulation” event, which can sometimes mark a bottom and a potential buying opportunity.
• Context is Key: The video highlights a historic crash on October 10th where over $183 million was liquidated on just one exchange. These extreme events are often where trends reverse, as the “weak hands” are washed out.

Combining Indicators for Better Accuracy

The tutorial emphasizes that liquidations data should never be used in isolation. To build a robust strategy, combine it with:

1. Open Interest: High open interest indicates a lot of active positions (fuel for the fire).
2. Funding Rates: persistently negative funding rates suggest a crowded short trade, increasing the likelihood of a “short squeeze.”
3. Technical Support/Resistance: Look for liquidation spikes that align with key daily highs, lows, or moving averages.

By monitoring where traders are getting wrecked, you can avoid becoming one of them and instead identify high-probability reversal setups.

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