This advanced heatmap article will build on the fundamental basics that we explored in Heatmap Basics. We recommend that you start there first, and return here afterwards.
Whilst generic candlestick based charts may show when the price changed previously, the TradingLite Heatmap may show crucially, where and why price may change in the future.
Although it is not recommended to base your trading methodology solely upon the information available via the TradingLite Heatmap, it can often provide a solid foundation with which to accompany or confirm, other forms of technical analysis.
The greater the time spent analysing Heatmap data, the often subtle and nuanced behaviours of order-flow within the Order Book can be visualised, and aid in your understanding of the intricate characteristics of each market.
As briefly explained in our Quick Start Guide and Heatmap Basics guides, the TradingLite Heatmap is a visual representation of the limit orders within the pair’s Order Book. This is updated in real-time for the current candlestick.
At the end of the candle’s life, a colour sensitive ‘snapshot’ of the Order Book is recorded. These ‘snapshots’ are then shown for each previous candle that is within view on your chart. Collectively, these previous ‘snapshots’ create the visualisation of Heatmap, enhancing the traditional price chart.
Given that all orders within the Order Book are limit orders, the TradingLite Heatmap can also be considered as a historical record/visualisation of liquidity changes, which could be incorporated within your trading approach.
Heatmap blocks above the current price, show Limit Sell orders
Heatmap blocks below the current price, show Limit Buy orders.
Blocks may change color or disappear as time passes.
If a block changes color, the value of orders at that price is changing.
If a block disappears, the value of orders at that price is now zero.
When you zoom in enough on the heatmap, you’ll notice that there will be values displayed within each one of the blocks.
The unit of these values is determined by the exchange.
For example, when viewing a Bitcoin market, some exchanges will use BTC as the unit, whilst others, will use USD.
The benefit of a lower block size/incremental value (HD) being selected, is that the Heatmap will provide the location of limit orders/liquidity within the Order Book with 5 x greater accuracy than the standard (SD) option.
As an alternative to a persistent zoomed appearance of the Heatmap, you also have the TradingLite Heatmap Lens.
This handy tool waits until your crosshair becomes stationary to provide a mini zoomed windows of the Heatmap values.
Holding the shift key, you will fix the cursor horizontally.
Holding the alt key, you will fix the cursor vertically.
To fully appreciate the TradingLite Heatmap, and to ensure it is providing you with the greatest utility possible for your analysis, configuration of the various Heatmap settings is crucial:
TradingLite gives you the ability to configure how the heatmap’s data is both rendered and filtered.
This is achieved by using the intensity slider within the top toolbar. The slider’s colors serve as a legend for the Heatmap.
The slider on the left determines the minimum value of orders to be displayed within the Heatmap. This will filter/remove blocks with a smaller value.
The slider on the right determines the peak value of orders on the Heatmap. This will determine the range and intensity of the heatmap's color scale.
The intensity scales allow a greater degree of granularity/sensitivity in the visualisation of the Heatmap.
The dropdown, which accompanies the sliders, allows the ability to finely tune the minimum and peak unit values.
This dropdown also displays the pair’s contract details. This includes the value of one unit, in addition to the HD/SD Heatmap block size.
The Heatmap can be Extended which can be used will help identify the current supply/demand liquidity pools, with greater clarity.
To extend the Heatmap:
Select the desired value from Extend Heatmap
By selecting a custom theme for the Heatmap (Layer Settings > Customize Theme), you have the ability to select from a variety of different colour styles, to aid in your graphical interpretation of the chart.
Now you can specify two alternate gradients for the heatmap, separated by price. Pictured below is ‘Hellfire’ & ‘Lucky Day’.
To activate dual gradients for your heatmap, navigate to:
Chart Settings > Theme > Advanced Theme Customisations
TradingLite's dynamic and adaptive Heatmap algorithm will automatically adjust Heatmap block sizes accordingly. This will ensure maximal efficiency of system resource use, providing the very best possible user experience.
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