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How to Use a Heat Map
A heat map is a visual tool that provides an at-a-glance view of the symbol across multiple timeframes.
Many traders tend to suffer from tunnel vision and only focus on one timeframe, but the more timeframes that a symbol is stronger (or weaker) in, the more bullish (or bearish) the trend. This is why it’s important to incorporate multiple timeframe analysis.
What do the colors mean?
- Pair is above the prior bar’s high
- Pair is above prior bar’s close but below the high
- Pair is flat
- Pair is below prior bar’s close but above the low
- Pair is below prior bar’s low
How Bullish or Bearish?
This is why it’s important to know whether the symbol is trading inside or outside the prior bar’s range to determine actual strength (or weakness).
The more timeframes that display dark green, the more bullish the overall price action. And the more timeframes that display dark red, the more bearish the overall price action.
Bullish and Bearish Examples
Just because the price is rising (or falling), does not automatically mean that the trend is bullish (or bearish). Price could still be in a “consolidation” which is when price simply moves sideways within a range and lacks a clear trend direction.
To determine true strength or weakness, you want to see if the price is trading outside the prior bar’s open, high, low, or close.
Below are examples of bullish and bearish price action.