Transcription
Hello every single one of you and welcome in today's video. In this video, I'm going to explain you everything you need to know about liquidation heat maps and how you can use this metric basically for your trading strategy.
This metric, liquidation heat maps, is very, very powerful, and most traders are not using it. And most people don't really understand how and why this works. And at the end of this video, you will know exactly how liquidation heat maps work and how you can implement this into your trading strategy. Now, let's jump straight into it.
First, let's break it down. What are liquidation heat maps? Well, it's actually a graphical representation of liquidation levels from positions of traders that are right now open. So, let's say you open a position from Bitcoin longing at $25,000 US dollars, your liquidation level is $21,000 US dollars. Then you will be in that liquidation heat map. And if a lot of people have the same liquidation level, then this will be a brighter and brighter color. And the brighter the color, the more liquidations are on that specific level.
Now, let's understand how that works. While Bitcoin's price is moving, people are opening positions on Bitcoin, long and shorts. And these liquidations are becoming important because they basically represent liquidity in the order book. And a lot of liquidity is actually working like a magnet. If there is a lot of liquidity below the price, it can drag the price like a magnet into that liquidity zone. And liquidation heat maps color code these zones, which makes it great for us to spot potential danger zones, but to also spot potential price directions.
So, how can you use liquidation heat maps for your trading? First of all, for your risk management. It's very important because you don't want to have your stop loss or your own liquidation at these specific levels, as the chances are increasing that Bitcoin is going to touch one of these liquidation levels.
The second way you can use this for your trading strategy is looking for entries and looking for exits. And this is very, very powerful, guys. Because when Bitcoin, for example, is trading at $25,000 US dollars, but there is a very big liquidation event going on at $24,500, chances are actually quite high that Bitcoin will dip into that level. So you can use that basically as an exit for your short or as an entry for your long position. Also, when you are already in a long position and you see there's a lot of liquidation happening above you and the price, you can use that to basically set your take profit right whenever the price is dipping into that liquidity, you can set your take profit.
So, this is how you can use these liquidation heat maps. And if you would combine them with different indicators, for example, like with the funding rates, it can become an even more powerful tool.
How to read these liquidation heat maps? Well, you can see the Bitcoin price and you can see certain colors ranging from purple to green to yellow. And when it's purple, there are not that many liquidation levels there. When it's getting green, it's already getting a little bit more. But when it's really bright, bright yellow, then we can see most liquidations are concentrated on that specific level.
So, how can one use these liquidations heat maps in their trading strategy? Well, like I mentioned earlier, you should combine this indicator with other metrics such as the funding rate. So, let's say you have negative funding across the board and there is a massive liquidation event happening above the price. That are already two confirmations that the price most likely drives up. Because when the funding is negative across the board, most likely it is creating pressure on the price of Bitcoin to go up. And if you also have a confirmation with a big liquidity grab and liquidation event happening above those levels, you can be more certain that the price most likely will tend to trend up.
This liquidation heat map is a very good indicator to use for short-term trading. If you want to feel the liquidation heat map, I have a link down below in the description. And if you want to view the funding rates together with the Bitcoin price, I have also a link to the will portal funding rates down below in the description.
If you want to know more about trading, if you really want to go through the process of learning by yourself how to create your own profitable trading strategy, which you eventually also can implement with the heat map indicator, make sure to join the cryptocurrency trading call course that I've created over on the blockchaintoday.com. This cryptocurrency trading course has helped hundreds of traders to become profitable and to develop their own profitable cryptocurrency trading strategy. I even got some emails from people that changed their career from something into a cryptocurrency trading career after doing the course that I've created.
First, I've always say, if you want to become a profitable trader, the first thing you need to do is to invest in yourself. Invest time in yourself, invest money in yourself, before you are going to try and do anything else. Educate yourself is one of the most important things. And I would highly recommend to you, if you feel that urge, if you feel that you really want to take a next step in trading, to join the cryptocurrency trading course on how to become a profitable trader. The link to the course is down below in the description for the ones that are interested in that.
If you learned anything in today's video, make sure to leave a thumbs up. If you want to stay connected with me and receive daily updates on the cryptocurrency markets, make sure to subscribe and hit the bell icon so you get notified whenever we upload new videos.
Then I want to wish every single one of you a beautiful day today, and I hope to see every single one of you in the next video.