Flow-Liq Correlation

See how order flow patterns relate to liquidation events — find out if flow predicts cascades.

What is Flow-Liq Correlation?

Flow-Liq Correlation combines two of the most important data sources in crypto trading: order flow and liquidation data. It analyzes whether changes in buying/selling pressure precede or follow liquidation events, giving you insight into the cause-and-effect relationship between active trading and forced position closures.

Order flow shows what voluntary traders are doing — actively buying or selling. Liquidation data shows what happens to involuntary participants — positions being forcefully closed. By correlating these two data streams, Flow-Liq Correlation reveals whether liquidation cascades are being driven by genuine selling pressure (order flow leading) or whether the cascades themselves are creating the selling pressure (liquidations leading).

This distinction matters because it changes the interpretation. A cascade driven by aggressive selling may continue after the liquidations end. A cascade that started from a small trigger and is self-sustaining through liquidations alone is more likely to exhaust and reverse once the cascade pressure fades.

Key Concepts

• Flow-Leading Pattern: Order flow shifts (e.g., aggressive selling) occur before liquidation spikes — suggests active traders are driving the move
• Liquidation-Leading Pattern: Liquidation events precede order flow shifts — suggests the cascade is self-sustaining and mechanical
• Correlation Strength: How tightly order flow and liquidation data move together — strong correlation means they reinforce each other
• Divergence: When order flow and liquidation data disagree — e.g., selling flow subsides but liquidations continue, suggesting the cascade may be nearing exhaustion

How to Use Flow-Liq Correlation

1. Open Flow-Liq Correlation from the sidebar under Liquidation Tools
2. Select the trading pair to analyze
3. The display shows order flow data and liquidation data on aligned timelines with correlation indicators
4. Look for leading/lagging relationships between the two data streams
5. Check the correlation strength indicator to gauge how connected the current move is

What to Look For

• Bullish signals: Liquidation-leading pattern combined with declining liquidation velocity — the cascade is mechanical and exhausting, with no active selling behind it. A divergence where sell flow drops but liquidations continue briefly often marks the bottom.
• Bearish signals: Flow-leading pattern with strong correlation — active sellers are driving price down and triggering liquidations, which creates more selling. This feedback loop can extend moves significantly beyond what liquidations alone would cause.
• Key patterns: Watch for correlation shifts during a move. A cascade that starts flow-leading but transitions to liquidation-leading suggests the active sellers have finished and only mechanical cascade pressure remains. The reverse transition (liquidation-leading becoming flow-leading) is more bearish as it means fresh sellers are joining.
• Combine with: Flow Chart for detailed order flow analysis, Liquidation Analytics for statistical context, CVD Chart for cumulative flow direction

Supported Exchanges

Tips

• This is an advanced analytical tool — it is most useful for experienced traders who already understand order flow and liquidation mechanics individually
• Focus on correlation shifts rather than static readings — the moment when the relationship between flow and liquidations changes is often the most actionable signal
• Use Flow-Liq Correlation to determine the nature of a move, then use other tools to determine its timing and magnitude