Liquidation Levels: Where Prices Get Pulled

Liquidations aren't random. They cluster at predictable levels. When price approaches those levels, it often gets pulled toward them.

Understanding this changes how you see price movement.

What Is a Liquidation?

When you trade with leverage, you put up collateral (margin). If price moves against you enough, the exchange force-closes your position.

Example:

• •Long BTC at $90K with 10x leverage ($100K position, $10K collateral)
• •BTC drops ~10% → your $10K wiped
• •Liquidated around $81K

Higher leverage = closer liquidation price.

Why Liquidations Cluster

Round numbers: Longs entered near $90K-$92K get liquidated below. Shorts near $100K-$102K get liquidated above.

Common leverage: 10x (~10% move liquidates), 20x (~5% move). These create bands of liquidation density.

Exchange patterns: Different exchanges, different default leverage, different clusters.

Result: predictable zones where liquidations concentrate.

Liquidation Cascades

Single liquidation is market neutral. But they trigger more liquidations:

Long cascade:

1. •Price drops → some longs liquidate
2. •Liquidations = market sell orders
3. •Sells push price lower
4. •Hits next liquidation level
5. •More longs liquidate
6. •Waterfall continues

Short squeeze: Same in reverse—short liquidations trigger buying, pushing price higher.

Violence depends on liquidation density ahead.

Liquidations as Price Magnets

Key insight: market makers see these levels too.

If dense cluster $500 above current price:

• •Moving price there triggers cascade buying
• •Move becomes self-sustaining
• •Liquidity sits at liquidation levels

Professional traders sometimes "hunt liquidations"—pushing price toward clusters knowing cascades will amplify.

Data We Track

Real-time liquidations: Spike = volatility occurring. Direction shows which side hurting.

Liquidation levels: Where clusters above/below? How much volume if price reaches? Asymmetry?

Cumulative (24h/7d): Have longs or shorts been liquidated more? Large long liqs = selling pressure exhausted.

Trading Approaches

1. Liquidation levels as targets: Dense cluster above = potential target. Expect acceleration then possible exhaustion.

2. Sweep anticipation: Price often sweeps levels then reverses. Clears weak hands, provides liquidity, smart money reverses.

3. Post-liquidation clarity: After major cascade, overhang cleared, positioning cleaner, moves more directional.

Combining With OI and Funding

High OI + Extreme Funding + Dense Cluster: Maximum fragility. Violent move incoming.

Falling OI + Normalizing Funding + Recent Sweep: Positioning cleaned out. New trend possible.

Rising OI + Moderate Funding + No Nearby Clusters: Healthy accumulation. Trending conditions.

Common Mistakes

1. •Treating levels as exact prices - They're zones, not precise levels.
2. •Assuming levels always get hit - Clusters show what happens IF price goes there, not certainty.
3. •Ignoring refresh - OI changes constantly. Yesterday's cluster may not exist today.

Key Takeaways

• •Liquidations cluster at predictable levels
• •Cascades create self-reinforcing moves
• •Dense clusters act as price magnets
• •Combine with OI and funding for full picture
• •Use levels as zones, not exact prices
• •Post-cascade markets often cleaner to trade

Next Lesson

We've covered the derivatives market: open interest, funding, liquidations. Next: Order Flow—what happens inside each candle. It's how you see the battle between buyers and sellers in real-time.