Bookmap Basic

Heatmap levels

The heatmap is a visual representation of the limit orders put into the order book. On the right side of the vertical timeline is the current order book. On the left side of the vertical timeline is the position of the order book in the past. This information is recorded as a color-coded map – offering a great way to analyze heat map stocks, futures, etc.

The heatmap is not a trading “system,” nor an indicator. It doesn’t tell you when to buy or sell. It simply provides accurate information about what market participants are doing. To the extent that inaccurate information leads to bad trades, Bookmap’s heatmap can allow you to eliminate this problem. This can lead to a more profitable trading business.

However, the heatmap does not interpret market data for you. In our educational materials, we provide theories as to what order book information “means” in one context or another. But ultimately, you must decide how to trade based on the information Bookmap gives you.

A good analogy for trading with Bookmap is real-time multiplayer games. If you play online poker, for example, you can choose to pay attention to other players’ behavior. You can pay attention to whether a player bets or folds in this or that circumstance. You may still misinterpret why the player is betting or folding, but at least you have more information than you would if you only paid attention to your own cards. 

The heatmap displays true and non-aggregated market depth data with a precision of up to the pixel resolution of your monitor. This allows you to see what the other players are doing. This should be better than not being able to see their actions.

About Statistics

A great movie called Moneyball is really all about baseball, a true story about two guys Bille Bean and Peter Brand, who developed a system for selecting a winning team that cost substantially less than millonaire teams like the New York Yankees would spend. The thing behind this story was that not only did they understand that some players were undervalued and bought these players, but they had the courage to stick with their system in the face of a string of successive losses, despite the world thinking they were crazy.

It’s much like trading in that sence, as once you have a system that you have devised and backtested, you have to have belief in it and trade it, even when you have those periods of losses. Armed with the statistical knowledge, the trader might gain additional confidence in his trade idea and might even trade it more aggressively. Knowing what to expect based on precedent—and then seeing if the market actually follows its historical tendencies—helps prepare the minds of discretionary traders for a variety of market scenarios.

As example, I know from my statistical studies that 70% of the time, the balanced markets tend to revert back to their value (BTV), especially under conditions of relatively low momentum. Another stat shows that 75% of the time, the imbalanced markets tend to seek balanced targets (PBT), especially under conditions of relatively high momentum.

Another study shows that if a market opens around previous value area and then remains for two half-hour periods into value, there is an 80% chance that market will rotate all the way to the other side of value (VAR). One more stat shows that if a market prints a new record high at ETH, there's 80% chance that record high can be revisited during RTH.

These are some statistical E-Mini SP500 numbers, that can provide guidelines for discretionary traders:

-90% of the time, one side of initial balance (IB) is retested.
-90% of the time, one side of overnight (ON) range is tested.
-83% of the time, one side of prior day range (PD) is broken.
-80% of the time, the previous value area rule is fulfilled.
-80% of the time, the half gap (50% RTH gap) is tested.
-55% of the time, the previous gap has been closed.

-72% of the RTH days are Normal days (Bimodal/Trimodal).
-18% of the RTH days are Trend days (Multimodal Profiles).
-10% of the RTH days are Neutral days (Inside ON Range).



Remember that context is extremely important, don't try to use any statistic as a rigid, systematic trading rule, blindly applied to all market conditions. Statistical analysis provides an hypothesis only; current market action will either support or refute these hypothesis.

Order Flow Alerts

Most professional day traders rely on current trade price and volume information for finding low risk entries based off the order flow. There is an inherent performance edge observing these market components audibly. You will notice that patterns in market behavior are far more obvious, and the order flow and tape much easier to comprehend. Using sound to represent core market information is a unique and completely overlooked way of enhancing market information processing. Traders get caught up reorganizing market data visually to attempt to understand the present market conditions, when paying closer attention to the actual price and volume action is all that is required.

TickStrike is an audible trading tool to listen order flow, buying and selling activity by converting market data into trade sounds. TickStrike gives traders the constant exposure to the market that is necessary through immersion in trading sounds, with added flexibility from the trading monitors. Traders can then focus their attention effectively when hearing ideal market conditions according to their plan. You can probe TickStrike web version at FinancialJuice

Glossary of Terms

PBT: Projected Balance Target, projected level that gets the completion of a symmetrical balanced 'D' shaped bell curve.

OSR: Opening Swing Range. First high and first low set by the initial auction right after the NYSE market opens.

BTV: Back to Value, stats say that 70% of the time, balanced markets tend to revert back to their value (Point of Control).

1TF: One Tick Failure, SP500 tests ONH/ONL or HOD/LOD by 1 tick before finding the opposite force pushing on the other way.

SOC: Scene of Crime, zone where a news-based impulse move was initiated and is therefore susceptible to be visited again.

VAR: Value Area Rule, If market trades outside of value area and then moves back into value, there is 80% chance of filling whole value.

LVN: Low Volume Node, level where there's a low amount of volume in the profile with higher chance to be a rejected area.

HVN: High Volume Node, level where there's a high amount of volume in the profile with higher chance to be an accepted area.

HVE: High Volume Edge, last upper/lower level of a higher volume range with great chance to work as support/resistance area.

GAP: Excess that indicates that the market is imbalanced, and it comes from today's opening price vs. yesterday's close comparison.

LIS: Line in the Sand, key level that shows who could be in control above/below that level, it works as a bull/bear line.

MID: Midpoint, key level to watch due markets tend to surface on a 50% pullback or 50% rally of the initial auction range.

SOH: Sit On Hands, warning used when the market is choppy or erratic and trades on either side have low odds of success.

OTF: Other Time Frame, refers to any time frame greater than intraday; usually daily, weekly or monthly charts/players.

MOC: Market-on-Close order is a market order that is submitted to execute as close to the closing bell price as possible.

CVD: Cumulative Volume Delta. It refers to the difference between buying and selling volume. The main use is to confirm market bias

IVR: Implied Volatility Range expected after multiply the last price by the implied volatility and the square root of the time frame. 

MFE: Maximum Favorable Extension, refers to the difference between current range (H/L) and impled volatility range expected (IVR).

IB: Initial Balance

ONH: Overnight High
ONL: Overnight Low
VAH: Value Area High
POC: Point of Control
VAL: Value Area Low
HOD: High of the Day
LOD: Low of the Day
EOD: End of the Day
ATH: All Time High
RTH: Regular Trading Hours
ETH: Electronic Trading Hours
1SD: One Standard Deviation

YHOD: High of Yesterday

YLOD: Low of Yesterday
YVAH: Yesterday Value Area High
YVAL: Yesterday Value Area Low
YPOC: Yesterday Point of Control

CME Rollover Guide

All of the e-mini index futures contracts trade on the quarterly expiration cycle. Contract Rollover occurs on the Thursday a week before the expiration Friday for the e-minis, this is the second Thursday of March, June, September and December. Each month is represented by a single letter:

H = March
M = June
U = September
Z = December

Since futures contracts expire, a position in an expiring contract, if it is to be continued, must be rolled to the next nearby futures contract. For an initial long (short) position, this means selling (buying) the expiring contract and buying (selling) the next contract.

There is usually a difference in price between the two contracts of a roll, referred to as the forward premium or discount (or spread) and this difference needs to be taken into account when calculating the unrealized profit or loss on a position or the setting of a protective stop order after the roll.

Both sides of the contract roll-over should be executed at the same time, otherwise it is referred to as "legging" into a position, and a spread order is typically used for this. In most cases, a spread order is entered as a market order but it can be specified as a limit order if the trader wants to have greater control over the spread price.

For deliverable futures contracts, which are most of them, a position should be rolled prior to the first notice day. The first notice day begins the delivery period and it is generally harder to roll a position once it is in the delivery period.

All positions, whether the contract is deliverable or cash settled, must be rolled prior to the last trading day. You should contact your broker to obtain a current schedule of these dates, referred to as an expiration calendar.

All open orders that are based on the expiring contract, for example, a protective stop order on the expiring contract, need to be canceled and replaced with new orders corresponding to the new contract after the roll. Keeping accurate records is a good way to not forget any such outstanding orders.

If you trade price and structure only, you can trade the continuous contract but if you trade price with order flow, you have to trade where the volume it's much easier to read. If you're not sure, simply don't trade rollover days until the volume of the new contract is much higher than the expiring contract.