Enabling Heatmaps allows the TrendSpider to use complex mathematical calculations to identify areas that have strong Support & Resistance levels on any chart and on any timeframe which may be overlooked by manual methods of charting.
In this documentation, we will explore:
- Heatmap Fundamentals
- Enable Heatmap
- Heatmap Preferences
- How Heatmaps Are Generated
- Important Notes
Let's get started 🚀
Heatmap Fundamentals
Traders can use Heatmaps to confirm or identify levels of interest on any chart on any timeframe using the chart visuals. Areas, where multiple Support & Resistance (S/R) levels clustering have been detected, will be illustrated in a brighter red (strong potential support/resistance) on the heatmap; while areas, where there was a little confluence, will not be shaded (or lightly shaded) to highlight the most likely path of least resistance for the price to travel.
The Heatmap illustrated on the chart is a range that is determined by analyzing the price action in between the two “Truth in Analysis” lines (similar to how other automated analysis features in TrendSpider work). This is the analysis range and is displayed to help you know that the system is being honest with you, and helps keep you honest with yourself since you know exactly what range of price action was analyzed to identify the levels on the heatmap.
Please refer to the documentation- Hotkeys and Shortcuts Guide for more information on the TrendSpider User Interface.
Enable Heatmap
You can add the heatmap to the chart by simply navigating to the top toolbar and clicking on the Heatmap. By Default, TrendSpider will enable Horizontal Heatmap on the chart but the traders can change this preference anytime (explained in the subsequent heading below)
Note: You cannot enable heatmaps with Log Scale turned on.
Heatmap Preferences
While enabling the heatmap from the top toolbar, you can select the type of heatmap you want to render on the chart. There are three types of heatmaps that help you to visualize support and resistance on the chart:
- Horizontal
- Depth
- Trends
Step 1: Click on the vertical ellipsis (⋮) adjoining Heatmap button.
Step 2: Select your preference from the Heatmap Type drop-down menu.
Step 3: Click on the Apply after making the selection.
Depending on your computer’s CPU and memory specifications, the time required to load the applied Heatmap may differ.
How Heatmaps Are Generated
In this section, the methodology used for generating the heatmaps has been explained. The actual specific method will vary based on the type of Heatmap you are using.
Assume that the below illustrated is your chart on which the heatmap needs to be graphed.
First, a grid with a fixed size (40x60 cells) is generated and placed all over the chart. However, for the explanation purpose, we have demonstrated a smaller count of cells on the chart.
Next, the heat for each cell is calculated. In the illustration below, the heat is represented as numbers. Heat is equal to a number of special points, inside the cells.
There are two kinds of special points:
- Low of a red candle
- High of a green candle
Afterward, the values for cells having their heat below the threshold (3 for the purpose of this explanation) are wiped off to reduce the noise.
Next, each special point is gradually made to have a “Weak” strength over time so that the brightness of the heatmap for these points fades over time.
At last, the strength is used for calculating the color and filling in the boxes on the grid with various shades of red to generate the heatmap.
As already explained above, the actual specific method for calculating and generating the heatmap will vary based on the type of Heatmap you are using. Let’s have a look at them one by one.
Horizontal Heatmap
Horizontal heatmaps are calculated from an overlaid grid that calculates cells that have clusters of candles with a sequential number of highs on green candles and lows on red candles. The Horizontal Heatmap then projects these areas of past confluence to illustrate current areas of support and resistance. Horizontal Heatmaps can be used to show or confirm S/R levels on the chart.
**Note:* Areas of dark red translate to a lot of support or resistance, while lighter red translates to less support and resistance.*
Depth Heatmap
Depth heatmap is calculated from an over-laid grid that determines the number of trend lines that cross through the cells in the grid. The more lines that cross through each cell, the brighter the color will be and hence revealing areas where support or resistance is present. The areas with fewer trend lines crossing through cells will be lighter in color, with the color gradient lessening as the cells move away from the cells with the most trend line confluence.
Trends Heatmap
Trend Heatmaps use the same calculations as Depth Heatmaps; determining the number of trend lines that cross through a cell in the overlaid grid. However, this type of heatmap does not color adjacent cells as they move away from the cells with the most trendline confluence but generates the raw data as the system captures it.
Important Notes
- Heatmap will not be visible when you download or share the chart
- You cannot enable the heatmap with the log scale turned on
- Heatmap will not refresh automatically
- Heatmap never accommodates after-hours price data