Daily Liquidity Peaks and Troughs [ST]

How it works

The indicator calculates average volume over a specified lookback period using a simple moving average (SMA). It then determines a volume threshold by multiplying this average with a configurable multiplier, which helps filter significant volume spikes.

When analyzing each trading bar, the script checks if the current high or low represents a peak or trough within the lookback period. If the volume exceeds the predefined threshold, the bar is marked as a liquidity peak or trough, indicating potential areas of strong buying or selling pressure.

Why it may be useful

By combining volume analysis with pivot point identification, traders gain insights into market dynamics that might not be apparent through price action alone. The indicator helps visualize key liquidity zones where significant market participants are actively trading, potentially signaling important turning points or trend continuation.

Understanding these liquidity peaks and troughs allows traders to make more informed decisions about entry and exit points. The visual markers and customizable parameters provide a flexible tool for interpreting market sentiment and identifying potential trading opportunities across different market conditions.

When to explore it

This indicator works best in markets with clear volume patterns and during periods of significant price movement. It is particularly useful in trending markets where volume confirmation can provide additional validation of potential trend reversals or continuations.

Traders should consider using this signal in conjunction with other technical analysis tools to increase the probability of successful trades. It is most effective when applied to liquid markets with sufficient trading volume, such as major stock indices, forex pairs, and actively traded commodities.

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