Using a Heatmap for Trading
If you find it difficult to pick a coin to trade when you open up your laptop, you are not alone. In fact, over my years of trading and coaching other traders, this is a super common frustration. It's one thing to know you want to trade on the day, it's another thing to find a trade. Even if you are OK on the charts, which charts do you even focus on drawing up?
While there are many different ways to approach this including following news, momentum, fundamentals and more, one tool which you might find helpful to add to your toolbox is the humble Heatmap.
As the name suggests, a Heatmap displays in color what moving and what’s not. Red for negative growth, green for positive growth and usually grey or black for anything relatively neutral on the day. In a nutshell Heatmaps allow us to visually find things. Sounds simple, and it is, but it's also powerful for being more efficient with your time.
There are a few different heatmaps around in the industry, but some of the best are offered by TradingView.
Why I like Heatmaps from TradingView
Firstly, TradingView covers both Crypto and Stocks. I switch between these 2 markets a lot, as do many traders. So, having them both on one website is great for me.
Secondly, you can physically change what’s displayed in a user friendly filter. I love this, because although Heatmaps look great, they can often overwhelm you.
Here is an example of the difference between the standard map vs filters used:
In the first image, the Heatmap is in the standard format. In the second image, I have toggled off the “red” (-3%, -2%, -1% and 0%). This now leaves me with the stocks that are moving up. You can already see the power of this strategy.
Using a Heatmap to find a Thematic move
Its also possible view the standard Heatmap and visually scan for a particular sector that’s more “green” than others, indicating strength in a thematic sense.
Let's take a look below:
In the above image, you can see that at a distanced glance, the Heatmap is showing more green in the Health Tech and Consumer Services sectors. Again, a powerful step forward to locating a trade.
Lets now click on these sectors to blow up the picture and find trades:
The Health Tech Sector, expanded:
From here, I can simply toggle off the “red” again. The results are fast and effective:
In the final image, you can now see that I have 12 stocks from the Health Tech sector of the S&P500 that are green and moving.
Summary
Using Heatmaps can be a fast and effective way of narrowing your focus, blocking out the noise and enjoying the hunt. You can then move to Technical Analysis.
All heatmaps can be found directly on the TradingView website and I recommend adding them to your toolbox when looking for a trade!
For more education, articles and resources, visit my main website — www.glennleese.com
If you are looking for a way to continuously improve your trading, consider creating a Trade Planner. You can find my Trade Planner Template on Etsy.
