Misconceptions and truths about the 'Futures Liquidation Map'!
Here is a wealth of analysis, purely for discussion, without emotions, welcome to observe!
Misconception 1: Liquidity on the liquidation map = liquidation volume? Many old friends might think that the liquidity on the liquidation map is the real-time liquidation volume? Nonono!
The truth: The liquidation map only marks opening behaviors, not closing! Over 90% of liquidity has already been closed! We focus on the new liquidity within a monthly cycle of 3-5 days, used to compare accumulation intensity.
Data source: 100% from real-time transaction data (buy/sell + transaction amount) of exchange futures trading pairs, publicly transparent, anyone can check! The calculation of liquidation prices and intensities is based on big data fitting, derived from the historical liquidation market's rise/fall, to create a 'profile' of leveraged traders, then allocate the liquidation intensity of new positions.
Key point: The liquidation map is not just a random drawing, but a scientific derivation based on big data! Want to make money just by relying on the liquidation map? Wake up, that's impossible! The potential range of price fluctuations is not a predicted direction! The trend structure is the core!
Error case: Shorting when you see bullish liquidity below in a bullish trend? This is a big taboo! In the face of a major market, any indicator may fail!
Suggestion: Combine with trend analysis, don’t treat the liquidation map as a 'holy grail,' otherwise, it's easy to be taught a lesson by the market! Misconception 3: What’s the use of the liquidation map? Don’t rush, this map is indeed quite useful! It's just that it depends on whether your trading system is suitable!
Liquidity Grab in a volatile market. Short-term traders often set their stop-loss/liquidation prices outside the range, and prices clear these liquidations.
Trend market: When the spot market dominates the trend, futures liquidity is just a 'supporting role.' But the new futures liquidity is like 'fuel,' which can help you determine whether the trend still has endurance!
Misunderstandings from my painful lessons! Don't be fooled by my thorough analysis; I have stumbled too:
Case 1
Case 2: In May, BTC rebounded to 107k, and the liquidation map showed that bearish liquidity was cleared, but I ignored that the bullish trend was intact, and shorting at 107k led to significant losses! Lesson: No matter how good the indicator, mistakes can happen during trading! Every mistake is experience; gradually improve your analytical framework! One last question: Is the liquidation map for traffic? Haha, 100k+ views is indeed nice, but traffic is not my goal! The truth: My analysis does not provide 'emotional value,' unlike some lazy predictions like 'XX billion shorts explode upward, XX billion longs explode downward!' I only provide neutral conclusions like 'If it rises, target XXX; if it pulls back, target XXX.'
Source of traffic: It's not about attracting attention, but fans are used to my daily 'routine updates' analyzing trends and liquidity! It shows that some people really find it useful!
Summary of the imitator's dilemma: What suits you is the best!
Trading systems vary from person to person: some rely on moving averages, some rely on market feel, and some rely on metaphysics. A system that can make money is a good system!
The liquidation map is just a tool; understanding its logic and usage scenario takes time.
Rational trading, embrace the market! #Cryptocurrency #Futures #LiquidationMap