Liquidation Heatmap Explained: How to Read Liquidation Levels and Clusters

Exchanges do not publish anyone’s liquidation price, so a liquidation heatmap has to be modelled. The idea is simple. When open interest rises during a five-minute candle, new positions were opened at roughly that candle’s prices. Those positions used some mix of leverage, and every leverage level gives a different liquidation price: a 100× long opened at $80,000 is liquidated about 0.5% lower, a 10× long about 9.5% lower.

the free liquidation heatmap on The Tradeskill does exactly that with Binance and Bybit data. It reads open interest every five minutes, splits the new positions between longs and shorts using the taker buy/sell flow of that candle (the aggressive side is assumed to be the leveraged one), spreads them across 5×, 10×, 25×, 50× and 100× leverage, and places each one at its liquidation price. When price later trades through a level, that level is removed: those positions were liquidated. When open interest falls, every level shrinks in proportion, because positions were closed.

Brightness is size. Dark purple means little or nothing is waiting at that price; blue, green and yellow mean more; white means the biggest estimated clusters in view. Each band starts at the moment those positions were opened and runs to the right for as long as they survive.

The most informative thing on the chart is a band that ends. That is a level price traded through, which means those positions were liquidated at that moment. Watching where bands disappear tells you where forced orders actually hit the market.

The profile on the right edge sums up the present: how much is still waiting at each price right now, long liquidations below price in red and short liquidations above in green. It is the quickest way to see which side is more crowded.

A cluster is a price zone where liquidations pile up. They form for a reason: positions get opened in bursts, during breakouts, news and squeezes, and positions opened together at similar leverage share similar liquidation prices.

Clusters matter because liquidations are market orders. A long liquidation is a forced sell; a short liquidation is a forced buy. When price reaches a big cluster, those orders hit the book all at once and can carry price further than the move that triggered them. That is why price so often seems to "hunt" liquidation levels: they are pools of guaranteed liquidity for anyone who wants to fill a large order.

As targets: a large cluster in the direction of a move is a natural place for that move to reach before it runs out of fuel.

As warnings: if you are long and there is a big long-liquidation cluster just below your stop, your stop sits right where forced selling is waiting, which is usually where price moves fastest.

As context for reversals: once a big cluster has been cleared, the forced orders are spent. Moves that liquidate a large cluster and then stall often reverse, because the fuel is gone.

A liquidation heatmap is a model, not an order book. Real traders use leverage the model cannot see, some add margin to avoid liquidation, and positions are closed manually all the time. Treat the map as a guide to where risk is concentrated, not a list of exact orders. For the real thing, watch the live liquidation feed beside it: those are actual liquidation orders from the exchanges as they happen.