How Does a "Liquidation Heat Map" Inform Traders about Potential Market Instability? ⎊ Path

How Does a “Liquidation Heat Map” Inform Traders about Potential Market Instability?

A liquidation heat map visually represents the price levels where large clusters of leverage are set to be liquidated. High-density "hot" areas indicate significant selling or buying pressure if the price reaches that level.

Traders use this to anticipate where cascading liquidations are most likely to occur, signaling points of potential extreme market instability.

How Does “Negative Gamma” Contribute to Market Instability?

Can Open Interest Decrease While Trading Volume Is High, and What Does That Signify?

What Is the ADL Indicator and Its Purpose?

What Is the “Market Signaling” Effect of Large, Visible Order Flow?

What Is the Relationship between Trade Size and the Level of Signaling Risk?

How Does a High Positive Funding Rate Indicate Market Sentiment?

How Do Exchanges Prevent ‘Socialized Losses’ That Can Occur from Large Liquidations?

What Is the Purpose of the ADL Indicator Lights on Some Exchanges?

Glossar

Cascading Liquidations

Trigger ⎊ Cascading liquidations initiate when an asset’s price declines sufficiently to breach the liquidation price of leveraged positions, particularly prevalent in cryptocurrency lending and derivatives markets.