I provide everyone with a method to see through market sentiment, which is to learn how to read the liquidation map.
The liquidation map shows the potential liquidation positions of tokens at this moment. The horizontal axis represents the market price level, while the vertical axis represents the relative intensity of liquidations. The higher and denser the columns, the larger the positions being liquidated in that price area, and the greater the impact on the market.
If a large number of liquidations occur at the same price in the market, then there will be a large number of buy orders or sell orders, which further drives the price up or down, causing another wave of liquidations. This is the chain reaction of the market, and this mechanism amplifies price volatility.
We can use the information provided by the liquidation map. At the positions where large liquidations may occur, we can make profits from fluctuations through grid trading, or we can avoid trading in that area in advance. This information can also help us optimize our stop-loss levels.
If you are the dealer and you want to acquire more low-priced chips, what should you do? The most direct way is to drive the market price down, create panic, trigger a chain reaction, and liquidate a large number of retail positions. This is also one of the common methods used by dealers to accumulate positions at low levels.
Therefore, if we can foresee these areas of high relative intensity for liquidations in advance, we can avoid setting our stop-loss levels here to prevent falling into the dealer's trap. These areas may also serve as support or resistance levels for a certain trend, allowing us to buy low or take profits at high levels.
