Liquidity Cluster Order (LCO) 🔍💧

1. What LCO shows

Liquidity Cluster Order automatically detects and draws:

• Bullish liquidity clusters (potential demand / accumulation zones) ✅
• Bearish liquidity clusters (potential supply / distribution zones) 🔻

Each cluster is:

• anchored on a volume pivot bar (a local maximum of volume),
• classified as bullish or bearish based on the recent price extension,
• extended forward in time until price mitigates (consumes) the cluster.

On the chart you see:

• Green rectangles → bullish liquidity clusters
• Red rectangles → bearish liquidity clusters
• A grey line inside each rectangle → the average price level of that cluster

Once a cluster is considered mitigated, it disappears from the chart and only active clusters remain.

2. Detection logic (in simple terms)

1. Volume pivot
2. • LCO scans for bars where volume is higher than the previous and next Volume Pivot Length bars.
   • These bars are volume pivots – potential anchors for liquidity clusters.
2. Context: bullish vs bearish
3. • The recent price behaviour defines a context:
   • • Bullish context → downside extension has dominated.
     • Bearish context → upside extension has dominated.
   • This context decides whether the next volume pivot will create a bullish or bearish liquidity cluster.
3. Bullish liquidity cluster
   In a bullish context:
4. • Cluster bottom = low of the pivot bar
   • Cluster top = midpoint of the bar ((high + low) / 2)
   • Interpretation: zone where downside pressure was absorbed and buyers stepped in aggressively.
4. Bearish liquidity cluster
   In a bearish context:
5. • Cluster bottom = midpoint of the pivot bar
   • Cluster top = high of the pivot bar
   • Interpretation: zone where upside pressure was absorbed and sellers took control.
5. Average line
6. • For each cluster, LCO computes the mean of top & bottom and draws a grey mid-line.
   • This acts as an internal equilibrium level of the cluster.
6. Mitigation (cluster consumption)
   On every new bar, LCO checks if a cluster is mitigated:
7. • For bullish clusters:
   • • It tracks a downside target price over the last Volume Pivot Length bars:
     • • Mitigation Method = Wick → lowest low.
       • Mitigation Method = Close → lowest close.
     • If this target price goes below the cluster bottom, the bullish cluster is considered mitigated and removed.
   • For bearish clusters:
   • • It tracks an upside target price:
     • • Wick → highest high.
       • Close → highest close.
     • If this target price goes above the cluster top, the bearish cluster is mitigated and removed.

Mitigated = liquidity in that cluster is assumed consumed / invalidated.

3. How to read LCO on the chart

You’ll see mainly:

• Green clusters below price → potential demand liquidity zones
• Red clusters above price → potential supply liquidity zones

Typical reading (not trading advice):

1. Fresh clusters
2. • Recently created clusters are often more relevant:
   • • Bullish cluster below price → area where buyers last absorbed sell pressure.
     • Bearish cluster above price → area where sellers last absorbed buy pressure.
2. Retests of a cluster
3. • Price returns to a bullish cluster from above:
   • • If price reacts and holds the bottom → possible bounce / long reaction zone.
   • Price returns to a bearish cluster from below:
   • • If price fails to trade above the top → possible rejection / short reaction zone.
3. Mitigated vs active clusters
4. • When price cuts through a cluster beyond its boundaries according to the chosen mitigation method,
     → that liquidity cluster is removed on subsequent bars.
   • Clusters still visible are active liquidity zones not yet fully traded through.
4. Using the mid-line
5. • That grey mid-line can be used as:
   • • a profit-taking or partial exit level inside the cluster,
     • a “fair price” reference within the liquidity zone,
     • a quick way to see if price is trading in the upper or lower half of the cluster.

4. Parameters (English)

Volume Pivot Length

• Bars used to:
• • detect volume pivots,
  • compute extremes and mitigation target.
• Lower values → more clusters, more noise;
• Higher values → fewer, more significant clusters.

Bullish Liquidity Clusters To Show
(former Bullish OBs To Show)

• Maximum number of bullish clusters displayed on the chart.

Bearish Liquidity Clusters To Show
(former Bearish OBs To Show)

• Maximum number of bearish clusters displayed.

Bull Fill Color / Bear Fill Color

• Fill color of bullish/bearish clusters.
• You can include alpha (opacity) values.

Bull/Bear Average Line Color

• Color of the internal mid-line for each cluster.

Average Line Style

• Visual style for the mid-line: "Solid", "Dashed", "Dotted".

Average Line Width

• Thickness of the mid-line.

Mitigation Method

• "Wick" → mitigation based on high/low wicks (more sensitive).
• "Close" → mitigation based on closing prices (more conservative).