What is a Liquidation Heatmap?
A liquidation heatmap is a visual tool that shows where leveraged trades in the crypto market are most likely to be liquidated.
Key Terms:
Leverage Trading: Trading with borrowed funds to take larger positions.
Liquidation: When the market moves against your position and it gets automatically closed.
Long Position: When you bet the price will go up.
Short Position: When you bet the price will go down.
What does the heatmap show?
It highlights the price levels where a large number of traders could get liquidated.
The intensity of the colors (like red, yellow, green) indicates the likelihood of liquidation:
Darker colors = Higher chance of liquidation
Why is it useful?
1. Helps predict potential market movements
2. Protects against trading traps
3. Identifies zones where major price moves could happen
For example:
Suppose Bitcoin is at $95,000.
If the heatmap shows a dark red area at $93,000, it means many traders could be liquidated there.
Big players might push the market in that direction to profit from those liquidations.
Where can you find liquidation heatmaps?
Coinglass
Hyblock Capital
TradingLite
Tensorcharts