How to Use the Heat Map

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Video Transcript:

Hello Traders. Welcome to the thinkorswim tutorial and the seventh module, market watch tab.

Today we’re going to learn how to read and how to use the heat map. The heat map can be found under the market watch tab, if you click on visualize. Now this is what the heat map looks like, and as you can see I am watching only all indices right now. This heat map is divided between the S&P 500, the S&P 100, the Dow Jones Industrial Average, the NASDAQ, and the Russell 2000. Now the first thing you need to know is that the component of each and every single indicie are inside of it. As you can see right here we have Chevron on the S&P 500, Apple, Microsoft. We have on the NASDAQ, Google, Facebook, Microsoft, Guild, Amazon. On the Dow Jones we have GE, we have Apple, Microsoft etc. I mean every single component of every indicie is inside the heat map.

Heatmap thinkorswim platform

Now, you can see that some companies are painted in red, some companies are painted in green, and some companies are just plain black. Well, the companies that are painted in green are the companies that have moved up today. And the companies that are painted in red, are the companies that have moved down, okay? And if you click here you can see the legend. The brighter the green, the bigger the move. And the brighter the red, the bigger the move to the downside.

If you hover your mouse over Google, for example, you can see that the last rating price of Google was $632.18 and it has moved 1.43% to the upside and you can see the market cap inside the information bubble. And another thing about this heat map is that visually, the bigger the square or the bigger the company name, the bigger this company is inside the indices. This means that, for example, Apple has much more weight inside the S&P 500 than Exxon Mobil, for example.

Heatmap of stocks on thinkorswim

Now, another thing you can do with the heat map, and this is a very good representation of what’s going on inside the stock market, for example. And the first use of the heat map is to find those stocks that are really moving, okay? And if you are a stock trader, for example, you can go here and you can see that Merck has moved 1.77% since the open and we have been open for about 50 minutes, okay? So we might want to go and take a look at Merck for further trading opportunities.

And one way to go and take a look at a company inside an indicie inside the heat map is to hover your mouse over it and click on it. If you click on the company, and you click send more information on MRK, you can get a quick quote, the market depth, the trade grid, a quick chart, the profile, and the seller. So we are going to get a quick chart of Merck right now, so we click on quick chart and the quick chart will appear here on the gadget menu. And right now we are looking at a daily chart on Merck, and this can be easily modified for intra-day purposes by clicking here and going, for example, to a one minute chart. And there you go. You can see the gap up in Merck, and the trading opportunity was right here at this price level. So basically around the 50 to 90 level. And because we spotted this on our heat map well we know that well we have this gap up and we have a strong move to the upside. Now we can look for news about Merck and we can wait for a pull back for a long position on it. This is one way to look or to use the heat map.

The other way is that, for example the way I use it is…just let me get rid of this quick chart. Because I trade futures, what I do is I look at the biggest companies inside the indices, and I look at how they are performing today. For example, if I am going to trade the YM which is the E-mini dow, I am going to look at Microsoft, for example. And I see that Microsoft has been strong today with Apple, Merck, and Chevron. And if we go to the E-Mini dow, you can see that we are 76 points up, which means we are bullish for the day, so I will be looking for long opportunities on the Dow. And I do that with all the other indices.

Now another way to use this heat map is to press the shift key and an indicie, this will bring out the heat map for that indicie, in this case we are looking at the Dow Jones Industrial Average and we are looking at the Dow Jones and each and every single one of its sector. And you can see that information technology sector is the biggest one for the Dow Jones, but with this help of the heat map you can see which sector is actually performing today. And we can see that health care is performing, information technology is performing, consumer discretionary actually is not, Walt Disney is down 1.3% and energy is fine, I think, with the Chevron up almost 2% etc.

Now you can also use this to look at the depth of each and every single one of the heat maps by going on the menu on the left side of the heat map. If we go back to all the indicies you can see that we have all indices here but we can look at the Dow Jones, we can look at only at the energy sector on the Dow Jones and we can do the same thing, for example, for the NASDAQ if we want to look at the biotechnology sector in the NASDAQ, the health care or the entire health care sector on the NASDAQ.

So basically this is how your going to be using the heat map for your daily trading, whether you’re trading stocks or trading futures.


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Adam is an experienced financial trader who writes about Forex trading, binary options, technical analysis and more.

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