Liquidation

Concept

Liquidation data refers to forced order (Force Order) data from exchanges. When a trader's account balance is insufficient to maintain a position, the exchange will trigger a forced liquidation. For more details on forced orders and liquidation, you can refer to What is Liquidation.

In the Grim Reaper indicator concept, it is mentioned that when prices fluctuate sharply, forced liquidation orders inevitably has parts in it. Forced liquidation orders for long positions are sell orders, while those for short positions are buy orders. Since forced liquidation orders are triggered as market orders, they provide significant liquidity to the market, further driving prices up or down.

The Grim Reaper indicator predicts the price levels at which significant liquidations are likely to occur, while the liquidation alerts here serve as notifications of the start of liquidation events. Therefore, we use it as a real-time trend alert for the market. When the market rapidly liquidates one side of positions collectively, it indicates a strong collective trend in the market, disregarding price action, news, or fundamental factors. This is an ideal time for scalp trader chasing highs and lows, and also a good opportunity to manually take profits.

How You Can Use It

Liquidation alerts are timing indicators. When forced liquidation order occurs and start a trend, traders are notified instantly and can:

• Observe the direction of the liquidation alert to gain insight into the current market trend.
• Determine the strength of the current trend by observing the frequency of the alerts.

Interface

• Side: ⚪️Long indicates long positions being liquidated during a price drop; 🔴Short indicates short positions being liquidated during a price rise.
• Average Price: The average price of the liquidation zone that generated this alert.
• Quantity: The amount of currency liquidated.
• Liquidation Price: The termination price used to calculate the liquidation position amount.
• Position Total: The total liquidation amount.

Notification Parameters

• For large-cap cryptocurrencies like BTC, ETH, and SOL, notifications are sent only when the liquidation amount exceeds $15,000, while rest of altcoins are notified when the liquidation amount exceeds $7,800.
• Alert Monitors all USDT trading pairs in futures contracts.
• Every qualifying forced liquidation order will trigger a notification.
• Multiple orders within 3 seconds will be consolidated into a single push.

Usage

For traders new to liquidation alerts, especially beginners, there may be information overload. The correct way to use liquidation alerts is to focus on the direction and frequency of liquidations, rather than the liquidation amounts. We generally categorize the activity of this alert into three types:

Continuous Liquidation

When alerts are frequently issued in the same direction, quickly, and continuously, it indicates that the market as a whole is collectively liquidating one side of positions. At this time:

• Scalpers can look for opportunities to go long or short for short-term gains.
• If you missed the move or believe the move is coming to an end, Consider waiting until the alerts calm down to observe potential reverse trading opportunities.
• If the liquidation trend is in the opposite direction of your position, consider manually stopping out.

Slowdown and Stillness

When alerts gradually decrease from rapid continuous output to silence, or begin issuing reverse liquidation notifications, it indicates that the price impulse may have stopped. At this time, you can use other tools to manually take profits or attempt reverse trades.

Consolidation Period

During consolidation periods, the market price fluctuates within a narrow range, attracting buyers from both sides, with fewer or no liquidation orders, as most traders' liquidation levels are outside the current range. At this time, traders can execute other plans and verify their bullish or bearish bias through subsequent liquidation trend.

Remarks

• Currently, liquidation alerts are only supported from the Binance exchange; other exchanges like OKX will be supported in 2025.
• Liquidation data comes from futures contracts, as there is no concept of forced liquidation in spot markets, and there is no forced liquidation data for spot margin.
• The alerts provide real-time collective trend signals, but the trend can stop at any time. Use appropriate tools for analysis when trading and treat these alerts as timing signals.
• Liquidation alerts reflect the overall real-time market trend, meaning they can be frequent or quiet at times. Traders should absorb the overall market direction from these alerts, and it is recommended not to turn off notifications to avoid missing important market moves.

Mute Channel

If you find the alerts too frequent, you can right-click on the channel and select Mute to silence the alert channel.