Price Action Toolkit: Liquidity Grabs

A Liquidity Grab occurs when an outstanding amount of orders at a level of liquidity are triggered suddenly, causing large and sharp price movements. Liquidity grabs typically lead to reversals. The Price Action Toolkit automatically plots a bubble on your chart when a liquidity grab is detected. Below we’ve outlined how each setting and feature works.

Settings

Pivot Length

The Pivot Length setting determines the number of bars back used to identify swing highs and lows.

• Low Length: A lower pivot length requires fewer bars to confirm a swing high or low, leading to more frequent liquidity grab detections at smaller price fluctuations.

• High Length: A higher pivot length requires more bars to confirm a swing high or low, filtering out minor price movements and detecting only significant liquidity grabs.

Wick-Body Ratio

The Wick-Body Ratio setting determines the required proportion between the candle’s wick and body to qualify as a liquidity grab. Only the bottom wick is considered when detecting liquidity grabs at a swing low and the top wick when detecting liquidity grabs at a swing high.

Low Ratio Example:

An example of a low Wick-Body Ratio would be 0.2. This means that a candle’s wick-to-body ratio only needs to be 0.2 or larger to be considered a liquidity grab. This setting allows for more liquidity grabs to be detected, including weaker price rejections, making it more sensitive to minor fluctuations at swing highs/lows.

High Ratio Example:

An example of a high Wick-Body ratio would be 1.5. This means that a candle’s wick-to-body ratio only needs to be 1.5 or larger to be considered a liquidity grab. This setting filters out weaker price rejections, detecting only candles with long wicks that indicate strong reversals at levels of swing highs/lows.