Introduction to the Liquidity Price Depth Chart Indicator

The Liquidity Price Depth Chart indicator for Tradingview is a unique tool that provides traders with valuable insights into market liquidity and potential support/resistance levels. Developed by LuxAlgo, this indicator visualizes the order book depth on a chart by highlighting sorted bullish and bearish prices based on their volume.

Liquidity Price Depth Chart indicator

Download Free Liquidity Price Depth Chart indicator

In this comprehensive review, we will cover the following topics:

  • What is the Liquidity Price Depth Chart indicator and how does it work
  • Key features and usage of the indicator
  • Interpreting the visualizations and identifying trade opportunities
  • Comparing to traditional depth of market indicators
  • Pros and cons of using the indicator
  • Suitability for different trading strategies and timeframes
  • Conclusion and final recommendation

What is the Liquidity Price Depth Chart Indicator

The Liquidity Price Depth Chart indicator is inspired by the visual representation of order book depth used by cryptocurrency exchanges. It aims to highlight the most liquid price levels on a chart by sorting bullish and bearish prices based on their volume in real-time.

Specifically, the indicator shows bullish prices on the left side of the chart and bearish prices on the right. The prices are represented by dots, which are then connected by a line. The displacement of the line relative to the x-axis indicates the degree of liquidity – the further the displacement, the higher the volume at that price level.

By visualizing the most liquid areas of the chart, traders can quickly identify potential support and resistance levels to inform their trading decisions. The indicator recalculates whenever the visible chart range changes, ensuring traders always have an up-to-date view of the market depth.

Key Features and Usage

The Liquidity Price Depth Chart indicator has several key features:

Bullish/Bearish Price Sorting

The indicator sorts bullish and bearish prices separately, allowing traders to easily distinguish between areas of buying and selling pressure.

Liquidity Visualization

The displacement of the line shows the degree of liquidity at each price level. Larger displacements indicate higher volume and liquidity.

Potential Support/Resistance Levels

The most liquid bullish and bearish prices are highlighted with dotted horizontal lines. These can act as potential areas of support and resistance.

Liquidity Cluster Identification

Rectangular shapes in the indicator visualization indicate clusters of liquidity. These highlight areas where significant buying or selling interest may exist.

Real-time Recalculation

The indicator automatically recalculates when the visible chart range changes, ensuring traders always have the latest market depth data.

In terms of usage, the Liquidity Price Depth Chart indicator can be used to:

By combining the indicator with other forms of analysis, traders can further validate high probability trade setups.

Interpreting the Visualizations

There are a few key things traders should look for when analyzing the visualizations provided by the Liquidity Price Depth Chart indicator:

Bullish/Bearish Order Imbalance

If bullish or bearish prices are clearly more displaced, it indicates there is significant buying or selling pressure in that direction.

Voids in the Visualization

Gaps between prices on the indicator suggest a lack of liquidity. However, significant volume may exist just beyond the void.

Steep Segments

Very angled portions highlight prices that moved rapidly. This suggests high volatility.

Rectangular Shapes

As opposed to v-shapes, rectangles imply balanced liquidity between various price levels.

Dotted Horizontal Lines

The highest volume bullish and bearish prices are highlighted with dotted lines. These tend to act as strong areas of support and resistance.

By analyzing these components of the visualization, traders can select high probability entry and exit levels for their trades.

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Comparing to Traditional Depth of Market Indicators

The Liquidity Price Depth Chart indicator provides traders with a unique perspective compared to traditional depth of market indicators:

Visual Representation

The indicator transforms depth of market data into an intuitive visualization, allowing rapid interpretation compared to just raw order book numbers.

Chart Integration

Displaying the information directly on the price chart allows traders to easily combine it with other forms of analysis.

Automatic Recalculation

The visualization automatically updates when the visible chart range changes. This ensures traders always have the latest information.

Cluster Identification

The ability to visually spot liquidity clusters is a unique feature not found in traditional depth of market tools.

Applicable to All Assets

The indicator can be used on any chart, not just assets with live order books. This makes it more versatile for traders.

Overall, while traditional depth of market indicators show raw numbers, the Liquidity Price Depth Chart transforms this data into actionable trading information visualized directly on the chart.

Pros of Using the Liquidity Price Depth Chart Indicator

There are several key benefits to using the Liquidity Price Depth Chart indicator:

Rapid Information Processing

The visual format allows traders to digest depth of market information faster compared to just raw numbers.

Chart Integration

Displaying the liquidity directly on the chart makes it easy to combine with other indicators and analysis techniques.

Applicable to All Assets

The indicator works on any chart, not just assets with live order books available. This makes it widely usable.

Spot Hidden Liquidity

Visualizing liquidity levels makes it easier for traders to identify hidden areas of buying/selling pressure.

Informed Entry/Exit Points

The potential support/resistance levels highlighted by the indicator offer high probability areas to enter or exit trades.

Free Indicator

The Liquidity Price Depth Chart is available for free on

, allowing any trader to access its benefits.

Cons of Using the Liquidity Price Depth Chart Indicator

While the indicator has several pros, there are also some limitations traders should be aware of:

Processing Overhead

It requires more processing power compared to simple indicators. This could slow down some older computers.

Repainting

The visualization repaints when the visible chart range changes. Traders should account for this in their analysis.

No Raw Numbers

It does not show the specific order book volumes at each price level like traditional depth of market tools.

Requires Understanding

Interpreting the visualizations takes practice. Inexperienced traders may struggle to use it effectively at first.

Limited Availability

It is only available on Tradingview. Traders using other charting platforms cannot access the indicator.

Suitability for Different Trading Strategies

The Liquidity Price Depth Chart can be used effectively with most trading strategies and timeframes. Some examples include:

Breakout Trading

Monitoring liquidity clusters makes it easier to trade breakouts from significant price levels.

Support/Resistance Trading

The potential support and resistance levels highlighted can form the basis of reversal trade strategies.

Day Trading

For short term traders, it provides valuable insights into imminent moves and volatility.

Swing Trading

Swing traders can use the indicator to aid in identifying market turning points to capitalize on.

While best suited to shorter timeframes, it can also be used by long term investors to visually monitor accumulation and distribution trends.

Conclusion and Recommendation

The Liquidity Price Depth Chart indicator provides traders with a unique visualization of order book depth directly on the chart. By transforming depth of market information into an intuitive format, traders can rapidly identify high probability trade entry and exit levels.

Some key strengths of the indicator include its visual format, automatic recalculation, chart integration, and flexibility across assets and timeframes. While it has some limitations in terms of repainting and lack of raw numbers, it remains a valuable tool for most trading strategies.

Overall, the Liquidity Price Depth Chart indicator is recommended for traders looking to improve their depth of market analysis and ability to identify support/resistance levels. The free availability makes it easily accessible to all Tradingview users. Both novice and advanced traders can benefit from incorporating it into their trading process.

Author: Dominic Walsh
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I am a highly regarded trader, author & coach with over 16 years of experience trading financial markets. Today I am recognized by many as a forex strategy developer. After starting blogging in 2014, I became one of the world's most widely followed forex trading coaches, with a monthly readership of more than 40,000 traders! Make sure to follow me on social media: Instagram | Facebook | Linkedin | Youtube| Twitter | Pinterest | Medium | Quora | Reddit | Telegram Channel

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