Bitcoin liquidation maps are essential for navigating the cryptocurrency market's volatility. These visual tools display liquidation levels, showing where large orders can trigger cascading price changes. Understanding these maps helps traders make informed decisions and avoid forced liquidations.
Liquidation occurs when an exchange closes a leveraged position due to insufficient margin. Long liquidations affect traders betting on price increases, while short liquidations impact those expecting a decline. A single liquidation cascade can erase millions within minutes due to excessive leverage.
Bitcoin liquidation maps, like those from CoinGlass, are heatmaps showing price levels where significant liquidations are likely. The X-axis represents the bid price, and the Y-axis shows the strength of liquidation activity. Taller bars indicate a higher potential impact on the market.
These maps provide insights into potential price movements and risk zones. Traders can use them to identify areas where leveraged positions are at risk of being closed. However, it's crucial to combine liquidation maps with broader technical analysis to avoid misinterpretations and costly errors.
Remember that this information is not investment advice. Trading involves risk, and thorough research is essential before making any decisions.
This article is based on our author's analysis of materials.