Volume Bubbles & Liquidity Heatmap [LuxAlgo]

The Volume Bubbles & Liquidity Heatmap indicator highlights volume and liquidity clearly and precisely with its volume bubbles and liquidity heat map, allowing to identify key price areas.

Customize the bubbles with different time frames and different display modes: total volume, buy and sell volume, or delta volume.

🔶 USAGE



The primary objective of this tool is to offer traders a straightforward method for analyzing volume on any selected timeframe.

By default, the tool displays buy and sell volume bubbles for the daily timeframe over the last 2,000 bars. Traders should be aware of the difference between the timeframe of the chart and that of the bubbles.

The tool also displays a liquidity heat map to help traders identify price areas where liquidity accumulates or is lacking.

🔹 Volume Bubbles

The bubbles have three possible display modes:

• Total Volume: Displays the total volume of trades per bubble.
  
• Buy & Sell Volume: Each bubble is divided into buy and sell volume.
  
• Delta Volume: Displays the difference between buy and sell volume.
  

Each bubble represents the trading volume for a given period. By default, the timeframe for each bubble is set to daily, meaning each bubble represents the trading volume for each day.

The size of each bubble is proportional to the volume traded; a larger bubble indicates greater volume, while a smaller bubble indicates lower volume.

The color of each bubble indicates the dominant volume: green for buy volume and red for sell volume.



One of the tool's main goals is to facilitate simple, clear, multi-timeframe volume analysis.

The previous chart shows Delta Volume bubbles with various chart and bubble timeframe configurations.



To correctly visualize the bubbles, traders must ensure there is a sufficient number of bars per bubble. This is achieved by using a lower chart timeframe and a higher bubble timeframe.

As can be seen in the image above, the greater the difference between the chart and bubble timeframes, the better the visualization.

🔹 Liquidity Heatmap



The other main element of the tool is the liquidity heatmap. By default, it divides the chart into 25 different price areas and displays the accumulated trading volume on each.

The image above shows a 4-hour BTC chart displaying only the liquidity heatmap. Traders should be aware of these key price areas and observe how the price behaves in them, looking for possible opportunities to engage with the market.



The main parameters for controlling the heatmap on the settings panel are Rows and Cell Minimum Size. Rows modifies the number of horizontal price areas displayed, while Cell Minimum Size modifies the minimum size of each liquidity cell in each row.

As can be seen in the above BTC hourly chart, the cell size is 24 at the top and 168 at the bottom. The cells are smaller on top and bigger on the bottom.

The color of each cell reflects the liquidity size with a gradient; this reflects the total volume traded within each cell. The default colors are:

• Red: larger liquidity
  
• Yellow: medium liquidity
  
• Blue: lower liquidity
  

🔹 Using Both Tools Together

This indicator provides the means to identify directional bias and market timing.

The main idea is that if buyers are strong, prices are likely to increase, and if sellers are strong, prices are likely to decrease. This gives us a directional bias for opening long or short positions. Then, we combine our directional bias with price rejection or acceptance of key liquidity levels to determine the timing of opening or closing our positions.

Now, let's review some charts.



This first chart is BTC 1H with Delta Weekly Bubbles. Delta Bubbles measure the difference between buy and sell volume, so we can easily see which group is dominant (buyers or sellers) and how strong they are in any given week. This, along with the key price areas displayed by the Liquidity Heatmap, can help us navigate the markets.

We divided market behavior into seven groups, and each group has several bubbles, numbered from 1 to 17.

• Bubbles 1, 2, and 3: After strong buyers market consolidates with positive delta, prices move up next week.
  
• Bubbles 3, 4, and 5: Strength changes from buyers to sellers. Next week, prices go down.
  
• Bubbles 6 and 7: The market trades at higher prices, but with negative delta. Next week, prices go down.
  
• Bubbles 7, 8, and 9: Strength changes from sellers to buyers. Next weeks (9 and 10), prices go up.
  
• Bubbles 10, 11, and 12: After strong buyers prices trade higher with a negative delta. Next weeks (12 and 13) prices go down.
  
• Bubbles 12, 14, and 15: Strength changes from sellers to buyers; next week, prices increase.
  
• Bubbles 15 and 16: The market trades higher with a very small positive delta; next week, prices go down.
  

Current bubble/week 17 is not yet finished. Right now, it is trading lower, but with a smaller negative delta than last week. This may signal that sellers are losing strength and that a potential reversal will follow, with prices trading higher.



This is the same BTC 1H chart, but with price rejections from key liquidity areas acting as strong price barriers.

When prices reach a key area with strong liquidity and are rejected, it signals a good time to take action.

By observing price behavior at certain key price levels, we can improve our timing for entering or exiting the markets.

🔶 DETAILS

🔹 Bubbles Display



From the settings panel, traders can configure the bubbles with four main parameters: Mode, Timeframe, Size%, and Shape.

The image above shows five-minute BTC charts with execution over the last 3,500 bars, different display modes, a daily timeframe, 100% size, and shape one.



The Size % parameter controls the overall size of the bubbles, while the Shape parameter controls their vertical growth.

Since the chart has two scales, one for time and one for price, traders can use the Shape parameter to make the bubbles round.

The chart above shows the same bubbles with different size and shape parameters.

You can also customize data labels and timeframe separators from the settings panel.

🔶 SETTINGS

• Execute on last X bars: Number of bars for indicator execution
  

🔹 Bubbles

• Display Bubbles: Enable/Disable volume bubbles.
  
• Bubble Mode: Select from the following options: total volume, buy and sell volume, or the delta between buy and sell volume.
  
• Bubble Timeframe: Select the timeframe for which the bubbles will be displayed.
  
• Bubble Size %: Select the size of the bubbles as a percentage.
  
• Bubble Shape: Select the shape of the bubbles. The larger the number, the more vertical the bubbles will be stretched.
  

🔹 Labels

• Display Labels: Enable/Disable data labels, select size and location.
  

🔹 Separators

• Display Separators: Enable/Disable timeframe separators and select color.
  

🔹 Liquidity Heatmap

• Display Heatmap: Enable/Disable liquidity heatmap.
  
• Heatmap Rows: select number of rows to be displayed.
  
• Cell Minimum Size: Select the minimum size for each cell in each row.
  
• Colors.
  

🔹 Style

• Buy & Sell Volume Colors.