Forex Heat Map®, How To Use For Trade Entries

The Forex Heat Map® is a real time visual map of the entire forex market. It is used for spotting strength and weakness in individual currencies. It also verifies and validates any trade entry across 28 currency pairs and 8 currencies, plus Gold. The heatmap will also point traders to additional trading opportunities in the same parallel/inverse group of pairs that you may have not considered during the trade planning process. We refer to these as supplemental trades. The Forex Heat Map® also tells traders when the market or individual currency groups have mixed or inconsistent signals and therefore it tells you when NOT to enter a trade. As a forex trader this is of great value because you can avoid fake outs, price spikes, etc. The heatmap also helps to identify the risk of entry on each and every potential trade.

Here is an example of a consistent signal on the heatmap showing CAD weakness. Since the CAD is weak across all pairs, a trader would consider a buy on the USD/CAD or possibly sell on the CAD/JPY. In this example the USD/CAD moved 150 pips in one trading session. The combined movement on all CAD pairs was much higher. The same logic applies to 8 currencies and all 28 pairs we follow. The number one question that forex traders have is when to enter trades, what pair to trade and in what direction, and how to quantify the risk of each entry. The Forex Heat Map® is a tremendous help in answering all of these questions every day, and is part of our complete trading system.

A heatmap is defined as a visual display of large quantities of data presented with different colors for easy visual analysis. The Forex Heat Map® is truly a heat map, with large quantities of pricing data flow through the readings in real time, but the heatmap can be scanned visually in about 30 seconds. The heatmap works continuously during forex market hours.

What The Forex Heat Map® Does Not Do

The Forex Heat Map® does not know the strength and quality of the trend, the direction of the trend, or even if a trend exists on the specified pair. The heatmap does not know if the trend cycle has just started, or if the pair has already moved deep into the trend. The heatmap does not evaluate the current market conditions, i.e, trending, choppy, cycling or ranging, etc. for you nor does it analyze support and resistance levels.

But that’s okay because Forexearlywarning provides all traders a set of some very simple trend indicators and inexpensive forex trading plans to assist with their daily trend analysis across 28 pairs. When using the heatmap, traders must check the condition of the trend with these basic indicators to answer those questions. Any trader can learn to check the trends using multiple time frames. Also, the Forex Heat Map® does not know when economic news drivers or unexpected news happened in the trading sessions, but various world economic news calendars are readily available to any forex trader, and these news calendars are part of our system.

Forex Heat Map® Layout and Controls

The basic layout of the heatmap is completely logical based on individual currencies and both trading sessions. There are two heat maps, one is for trading in the Asian session one for trading in the main session, i.e, European/London/US sessions. You can read this article to learn more about the the two different forex trading session and the best times to trade the forex market.

The top of each heatmap displays the current date and time in GMT, along with how much time remains until the percentages reset to zero (next reset in:), which is when the percentages reset to zero ahead of each trading session. The Forex Heat Map® indicator refreshes more or less continuously, for hands free operation, so entering trades on your trading platform and market monitoring is very easy. If you have two screens on your computer setup you can put the heat map indicator on one screen and your trading platform on the other. The heatmap also has a unique arrow system, which points traders towards what pairs should be considered first for possible trading.

The Forex Heat Map® runs on an independent server with price feed. In case of outages, we also have a backup version that is on a fully redundant data feed and fully redundant servers. You can trade a total of 28 pairs with any of our heatmaps. The Forex Heat Map® is likely the most logical way for traders to look at the forex market ever developed.

When To Use The Forex Heat Map®

In general, the best times to trade the forex market is always going to be in the main trading session, but a few times per month trades occur outside of this time. Your own experience watching the heatmap during the main trading session and demo trading these signals for about 30 days will convert any forex trader to this style of trading. Combining the heatmap with the free trend indicators on our website and support and resistance levels turns into a powerful trading system.

Specific times to use the heatmap would be when new, consistent movements are starting across any of the 8 currencies or 28 pairs we follow with this trading system. Forexearlywarning has a complete suite of alert systems to notify traders of market movement, like our desktop scanner, mobile app, and audible price alerts. Click on the link to learn all about all of our forex alert systems.

Forex Heat Map®, Reading The Signals and Percentages

In order to enter a trade successfully, the signals need to be consistent on the heatmap on at least one currency.

Right click on the chart image and open in a new browser tab for better view.

This is an excellent charting system we can give to any trader that matches the heatmap signals. Much better consistency compared to standard technical indicators.

In the example above the AUD is consistently weak on 7 out of 7 pairs, this is a consistent signal that almost always results in good movements. The JPY and AUD had slight strength so these pairs dropped hard. Use the same logic for all 8 currencies and gold in two directions. Always make sure all 7 pairs in at least one individual currency group are all pointing in the same direction, strength or weakness. Combinations of strength and weakness from two currencies is also acceptable. After some demo trading most traders adapt quickly to this system.

At the point of entry, you would like to have consistency, and all of the percentages at least 0.25% on all pairs in the same currency. For example if all of the EUR pairs are green and all seven pairs have consistent percentages of over 0.25%, the EUR is strong and consistent.

The heat map also has a handy arrow system that will appear to indicate what pair should be checked first for a possible trade. Look for consistent signals on these pairs as you visually inspect the heatmap for possible trades. These arrows will not appear unless the individual pair is trading at plus or minus 0.26% or more. If no arrows appear anywhere on the heatmap, it means the market is consolidating and moving sideways, and no trades are evident. If there are no arrows the entire market can be scanned in under 30 seconds.

The percentages on the heatmap are based on price movement. Calculating percentages for each pair is easy, for example if the NZD/USD trading at 0.8000, 80 pips of movement is 1.00%, just move the decimal point two places to the right in the price quote.

A "slingshot" is a Forexearlywarning slang term we use for when you have consistent strength on one side of a currency pair and consistent weakness on the other side. This is the most powerful signal and will produce the strongest possible movement, very safe to trade. Even slower moving pairs, like the EUR/GBP, NZD/USD or AUD/NZD can have very strong intraday movements slingshot on the heat map. Faster moving pairs like the EUR/AUD, EUR/NZD and pairs with the GBP on the left can produce 150-300 pips on one movement cycle in one trading session. Slingshots can break through clusters of support or resistance with relative ease and break very strong levels of support or resistance. You do not need to have a slingshot to trade with the heatmap, even if one currency is consistently strong or weak, profitable trade entries are possible in any trading session, day after day.

Sometimes the signals and percentages are inconsistent. For example half of the JPY pairs are red and half of the JPY pairs are green and the precentages are low, all of those pairs may not be good trades at all or just bouncing around and consolidating. The signals have to be consistent with all of the JPY pairs red, or all of them green, to consider for trading. Since our trading system is for 8 different currencies, just move to another currency looking for consistent signals and potential strong movement. One of the best functions of the heatmap is to tell you what pairs to avoid.

Why Would A Forex Trader Use The Forex Heat Map®

The number one question forex traders have is what pair to buy or sell, and when. The Forex Heat Map® indicator largely answers this question across 28 currency pairs, 8 different currencies, andgold. Experience about 30 days of demo trading with the heatmap in the main trading session and you will see pips come into your demo account.

The Forex Heat Map® indicator will open your eyes as to the true potential of 28 pairs as opposed to scalping one or two pairs with ineffective technical indicators. The Forex Heat Map® will prove to you quickly why other “systems” and “indicators” do not work because you can watch one system in action right next to the heatmap to see the difference. The best forex indicators is the forex market itself, and the heatmap reflects this simple concept.

As a trader, if you are not making pips you will start to with the heatmap. If you are making pips now you will increase your pip production. In some cases The Forex Heat Map® indicator will increase your pip production dramatically.

Most forex traders use standard indicators, like average true range, bollinger bands, and a list of over 100 other indicators. These indicators are attached to pairs, not individual currencies. The heatmap cannot be attached to an individual pair, like a standard indicator. In fact the heatmap uses the pairs as indicators, each pair is grouped with one common currency in each group. A simple but novel approach to market analysis

So the heatmap uses each pair to be "mini indicators" on the overall map, to produce the full view. You can look at the heatmap and view the entire market at a glance, rather than staring at one pair or one chart with one or more meaningless, ineffective standard indicators. The heatmap allows you to find the market momentum very quickly. The best forex indicator will always be the forex market itself.

Supplemental Trades

Our daily trading plans are based on the existing trends of the forex market. But sometimes the market start to move in another direction, or against the trend, due to unexpected news or market sentiment. Sometimes a non-trending pair takes on a new direction and starts to form a new trend. In many cases these pairs can be traded if the heatmap signals are consistent. We refer to these as supplemental trades, or “heatmap trades” and you click on the link to learn more about supplemental trades.

So the heatmap can be used to guide trade entries into trending pairs, and other trading situations too. The heatmap will spot the current market momentum whether or not a pair is clearly trending or not. Since we have a complete suite of alert systems, you will always know when the market is moving.

Using The Forex Heatmap® As Part of A Trade Strategy

The Forex Heat Map® is synergistic. All by itself it is an excellent tool but if you combine the live heatmap signals with any of the other components of the Forexearlywarning trading system, your trade entries improve incredibly fast. We list a couple of examples below, but all traders must commit to some level of demo trading to experience other situations.

Situation 1 – In the main session, a trader gets one or our mobile app notifications that the GBP is strong, or an audible price alert goes off on the GBP/JPY for a resistance break, or there is a GBP news driver on the world news calendar. The trader checks the GBP pairs for consistent strength on The Forex Heatmap®, and it is indicating a consistent buy signal of GBP strength. The GBP/JPY or some other GBP/XXX pair also has no nearby resistance, so more than likely you should enter this trade.

Situation 2 – In the main session, the trader gets a desktop alert from our market scanner. The indication is that the EUR is strengthening. The trader check the EUR pairs and the charts are mostly choppy or not trending. The EUR signals are not fully consistent on the heatmap. The trader makes the decision not to trade. In this case the trader was influenced by the fact that the charts on the EUR pairs were choppy, and the heatmap signals were inconsistent, so they opt out of the trade.

Advanced Trade Strategy - Basket Trades - Many forex traders refer to a basket trade as a trade where multiple uncorrelated pairs are traded at once. We have a better way to execute basket trades based on the heatmap signals. Our basket trade strategy is to set up a computer program, script or trading platform that buys or sell different groups of pairs with one common currency in the entire group or basket to be traded. This method of basket trading the forex is much more logical.

So when using the heat map a basket trade is a trade on a preset group of pairs, all in the same currency family. For example if the CAD pairs all indicate CAD weakness, and the signals are consistent, traders can simply push a button on their trading platform and execute a trade to buy and sell all 7 CAD pairs. When a preset amount of pips of profit is made on the CAD basket, the program automatically scales out and sets all stops to break even, or exits all trades completely.

The Forex Heat Map® Resources

Ten example trade entries for various forex pairs and currencies, plus gold using the heatmap and our charting systems: Trade Entry Examples

Full tutorial with technical informaiton: forex heatmap tutorial

Article about parallel and inverse analysis, the foundation of the heatmap and the forex market.

Link to a video about the forex heatmap.

Conclusions - The Forex Heat Map® can be described as unique, effective, time saving, fast, easy to interpret, visual, high value, novel, simple, powerful, flexible, innovative, intelligent, logical, big picture, accurate, real time, profitable, eye opener, educational, informative. The Forex Heatmap® is a great risk assessment tool for each and every trade. It shows traders why pairs move the way they do day after day.