Liquidity Heatmaps

Liquidity Heatmaps are visual tools that display the density of limit orders on an exchange's order book across different price levels over time. They allow traders to see where significant buy or sell interest resides, providing a real-time view of market depth.

These maps help identify clusters of liquidity that may act as barriers to price movement or magnets for price discovery. By tracking how these heatmaps evolve, market participants can infer the intentions of institutional players or algorithmic traders.

They are essential for understanding micro-level price discovery and the mechanics of execution. During high volatility, observing the thinning or thickening of these liquidity layers is critical for managing slippage.

This visualization is a core component of order flow analysis.