Liquidation Heatmap & Level Analysis
Overview
Analyze the distribution of leveraged positions and their liquidation price levels to identify zones where forced selling/buying will accelerate price moves. Liquidation clusters act as "magnets" — price tends to be attracted toward large liquidation concentrations because market makers and whales profit from triggering cascading liquidations.
Core Concepts
1. Liquidation Mechanics
How liquidation works:
# Long position liquidation
long_liquidation_price = entry_price * (1 - 1/leverage + maintenance_margin)
# Short position liquidation
short_liquidation_price = entry_price * (1 + 1/leverage - maintenance_margin)
# Example: BTC long at $65,000, 10x leverage, 0.5% maintenance margin
# Liquidation: $65,000 * (1 - 1/10 + 0.005) = $58,825
# A 9.5% move against the position triggers liquidation
Leverage and liquidation distance:
| Leverage | Liquidation Distance (Long) | Liquidation Distance (Short) |
|---|---|---|
| 2x | ~50% drop | ~50% rise |
| 5x | ~20% drop | ~20% rise |
| 10x | ~10% drop | ~10% rise |
| 20x | ~5% drop | ~5% rise |
| 50… |
