THE TRUTH about Heatmap & Liquidity – This is how the World Champion REALLY trades!

The truth about Heatmap and Liquidity Is heatmap the new holy gray at the markets or are we all just looking for liquidity? That's what every trader want, right? But is this the only tool helps us to look where the big money is flowing? Let's take a bigger and deeper look inside and let's choose together a decision. Is it right or is it wrong? I translated this video with AI because my English is not perfect and you will love it. Trust in me.

It will be amazing. A wonderful day everybody. So what do I want to talk to you about today? Today I want to raise your awareness a bit about the role liquidity plays in short term trading, especially for us. And the heat map is such a wonderful tool that's being heavily promoted these days. I want to dive a bit deeper into this with you and show you that institutional traders and we here at trade the traders who don't use it. And of course there are reasons for that. For us it's quite simple. There are many visual supports, but really the order books are the true market. And if I want to look for indications, if I want to see where liquidity was and where liquidity is, I don't need a heat map for that. I can see all of that in my order book and depending on the settings you choose for your books and so on. I'm going to show you now how deep we can look into the book, what information we can gather from it, and above all whether it's possible for us to identify which market participants are active there. Is there spoofing happening there? That's something people talk about a lot. Orders that are placed and then pulled away again just before they're reached, which by the way is absolutely forbidden. Nevertheless, it does happen sometimes. And yes, the kinds of stories you hear about this are really quite fascinating. But let's just take a look at it together for a bit. So here we can take a look at what the heat map is currently showing us for the S&P 500. I haven't made any changes to the settings or anything like that. It's just a completely standard setup. I also don't feel like putting in the effort to change it right now because what's really important to me is to show you what's actually going on here. At the end of the day, the heat map shows you where the large orders are. Now of course you need to know how big they are. The heat map can show you if they're really big, very thick and strong, or if they're Just somewhat large. But honestly, if you don't really know the market, and for example, you don't know that in the s and P500, that is in the ES future, an order needs to be over 250 or 300 contracts isolated and on its own for you to be able to judge that it's truly large. If you know it has 500 contracts, 400, 600, then you know it's really big. And yes, you can set all this information in a heat map and then you have it. But what you don't have is when you look at past block orders that were placed somewhere, block orders from before, you have no idea how they were executed, were they filled in large chunks, in small chunks, at high speed, at low speed, you can't immediately see that here at first. And that information is important for you because you need to know who was playing the markets aggressively there. Here's a nice example where the market just paused briefly at one of those old zones and now it just dropped below it. And maybe for a small scalper, $4 is a doable thing, but that doesn't really help us much. I want to show you what a desk looks like for professional traders. And if you ever go into one of those trading houses, you'll see that you hardly see any charts there. You see completely different things.

So let's take a look at what such order books really look like and what they show me. And with that, you have completely different ways to look into the market. And you can see it too. I'll make myself a bit smaller. How the market is behaving right here and now. It's just kind of moving around aimlessly. Here it goes up, here it goes down. Nothing major happening here. You have the corresponding volume profile for each respective market. This one is ZM, that's CL, that's the Russell, NASDAQ S&P FDAX and so on. Now you can see here, for each pair, we currently have 20 orders visible above and below the market. And of course there are stories, like in heatmaps, where you can see a lot more and so on. Yes, that's the case with us too. You just have to set it up yourself. The question is, what are you really looking for? And if you look at where liquidity is actually being sought right now, you can, for example, get to know the following perspective for yourself. But for me, the market immediately shows at first glance who currently has the upper hand. And I can see that simply by observing whether more is being traded into the bid or the ask what Speed underlies the whole thing and what reactions I get to corresponding large orders. Because it is true that a market seeks liquidity. But the question, and this is very important, is what kind of environment are we currently in? And that's why I can tell you, for us retail traders, such a chart only helps if you have already immersed yourself deeply in this world and have been able to visualize all the other information for yourself as well. And that's why, for example, we use an image like this and that gives us all the information we need. So what information do I have available here to get an overview of where liquidity is? Let's go back. A heat map shows you where liquidity was in the past. Where is liquidity currently? And is it very large or not so large? And now of course, the question is what information can I use for myself? Let's take a look at the book on the right here. I know it's probably relatively small for you now, but if I want, I can have 100 orders in a row displayed below the price to see how the orders are stacked there, large or small, in order or not. Yes, that already shows me everything that's in the heat map as well. I can see where there are big orders and where there aren't any. So I can immediately visualize, summed up for myself, where liquidity will be and where it won't. But much more importantly, let's move over here. It's about knowing where we currently are in the market and who is dominating the market right now. What kind of ideas can I come up with? What probabilities can I expect to help me figure out whether there are big players in the market right now or just small players like us. And if I want to pinpoint that for myself, then of course I first need to use market profiling like here to get an overview. Today we briefly approached yesterday's highs and now the market is going down and repairing the single prints. What does that mean? Who is dominating the market right now? I can tell you right now only the small players are active. There is absolutely no big game going on here so far. You can see that very clearly here as well. The market crashed below today's value area. But did it accelerate strongly? No, it's all very manageable. How else can I see that? For example, I can look here at the so called footprint chart. I can look at the footprints of the market participants and see how large the orders are on the bid and ask that have just been traded. And with that I'm already a bit closer to the market. But if I really want to know what's happening right now, who is providing liquidity, who is taking liquidity, and at what speed it's happening, then I need the corresponding order book and the heat map alone is definitely not enough for me. So with all these tools here, I can very quickly and easily locate and visualize for myself where there was large liquidity. For example, we can also look at this in a larger time frame, just like you would do in the heat map down here. I can see via the delta how much was traded in the respective time frames of the candles. I can immediately see here where the liquidity was, whether there was liquidity at the top or not, and what probability I can derive from that. And just like now, when the market drops, I can check whether it hits all liquidity, or as in this case, let's quickly turn it on. Oh, look at that. There was liquidity. And that's where the market stops for now. Now I can also consult the heat map and see whether these bars were really thick or not. Yes. What I can see here is how much was actually traded on the bid and how much on the ask. What I can also see is what was traded before that. Was it staggered? I can see whether large orders had already built up there from the bottom up beforehand, or whether that wasn't the case. And that gives me information. And I don't have all this information when I use the heat map. So I can clearly say heatmap, yes, you can use it if you don't have such a deep understanding of the markets. No, it absolutely doesn't help you to really see how the global money is currently being played. I can clearly deny that here, for example, you can see very well we've spent some time in the market. Now, what happens if you're someone who constantly tries to trade in the direction of the large orders. You just get totally crushed if you think that these orders absolutely have to be eaten up. I know traders who do the following. For example, they go and say up here there's a lot of liquidity. Now we've had the opening phase here.

After the market opening, the market immediately began to surge upward, taking off rapidly. Now they start at the latest. Here they go long.

Here they get stopped out, they go long again. Here they get stopped out again and eventually they've lost their money. And then the market does what it likes to do when there's a lack of liquidity and it moves up here and actually grabs the big liquidity. But there are also phases where the market just ranges, crashes down, forms the next range, crashes down again, forms the next range, and so on.

And then traders who trade like this tend to do the following.

And simply build the first position here, the second position here, the third position here, and eventually there's a big crash and the account takes a heavy drawdown. And that's the big danger if you can't read which market participants are actually active in the market at the moment. So let's just summarize this again. The heat map is a tool that can help me identify where big orders are and where big orders have been. We understand that liquidity is always determined by the market. But who is currently moving toward liquidity? Big players or small ones? Is that liquidity actually being taken or not? That only works if you have context. For example, right at the market open, you have higher probabilities than in the middle of the session when only the small market participants are currently active, or how extended are the respective opening phases. This gives you the opportunity to predefine certain levels using the heat map where the market might move to or not. And all of this information needs to be connected with each other. And that's why I'm not a fan of heat maps, because I have all the information clearly available here for myself. And I can tell you as long as the market is in stable phases, it will always be in balance and often won't pick up those large orders. It only does that at certain times or especially in certain market phases. And then I can look here in the order books, see very clearly who's dominant, what's being played here, which market participants are currently being aggressive, or which market participants aren't present at all. And if I just visualize these things for myself and stop relying on any tools that in the end only refer to things that are just one sided, then maybe now I know that I need to dive deeper into this world and really understand it from top to bottom. And I would claim that we know a lot about that. So what's my conclusion, our conclusion about the heat map, I can say yes, it can help you identify in the markets where large orders are, where large orders were, and what happened afterwards. If you look back at the past, you can. But can you really see who was actually dominant at the moment such a large order was placed? And can you see whether there's a high probability that these market participants have already offloaded that order block? That's going to be difficult. And I can tell you it's extremely valuable and effective for you if you Take the time to, just as I'm showing here, pick up these order books and learn how to read them. My dear Serge always said you have to learn to paint the chart in your mind. Then you'll also be able to understand what's happening in the markets. And then you'll recognize which key figures are being played in which market, for example, by larger market participants. Because here you see individual trades, not aggregated orders, but actual individual trades. And you can observe them if you notice that a market participant is constantly routing large orders into a position. But you see that not much is changing. You know, yes, that's an iceberg order. They just keep stacking up more orders there. If you see that a lot is being absorbed or something similar, in my opinion, that simply gives you much, much more and better information than if you only have a heat map that just provides you with these small fragments. And yes, I wish you all take this time. Liquidity really is what determines the market. And if you learn to read liquidity the way the big players do and they have visuals like these, then that's awesome for you because you'll realize this market is truly real. This is the pure market. And the footprint chart, in my opinion, also shows you much more than a heat map does. And that's why my conclusion is heatmaps are cool if you're starting to look at a lot of markets or if you can't quite figure out where the big liquidity is, is. But in my opinion, it's not a good way to build an edge for that. You simply need to understand more context. Thank you all. I'm glad and I hope you enjoyed this lesson. Thank you very much.