Liquidity is one the most important signals traders can pay attention in the market. It shows how market participants are feeding the price levels. It is not only with limit orders but also related with the speed that traders and institutions can answer for new price actions. Liquidity comes along with Volatility because they are proportional inversely and for the complete technical analysis over market movement, traders must watch both signals.
QuantWise Trading provide this indicator as open code, and we explain the original concept and its respective algorithm.

∆L= ∆V/∆P
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Knowing that the liquidity variation is the volume variation over the price (in tocks) variation.
This calculation is based on the volume variation over the same price rage movement. First, we have to find the Volume EMA from the bars – range = 10 ticks. The fixed bar size serves as a denominator for the volume references.

Now we have the average volume, we can see if market is providing or taking liquidity to move the price more slowly or quickly. If we need more contacts to fill up the same price range, it means that we have more liquidity from the other side, impacting on the price movement.
To calculate the discrepancy around the average we use the standard deviation. This is a very significant value because it shows how far from the mean the new incoming MA values are. The next step for our process is to normalize this number to make it relative and easy interpretation.
For this case we can use the same method as RSI indicator.

Now we have values from 0 to 100 representing the scale for Liquidity Index. As values are approaching 100 we see market participants providing liquidity to the market and most likely the price will change in a small range. The opposite works the same, with low liquidity, we can expect the price can change more rapidly, forming longer bars, breaking previous highs or lows.
This is not a directional indicator but works very well with others that can give a side signal.