Order book heatmap explained

Reading the picture

Time runs left to right, price runs bottom to top, as on a normal chart. Behind the price line, each price level is coloured by how much size was resting there at that moment. Dark means little or no liquidity. Bright means a lot.

A horizontal bright line that lasts for a long time is a wall: a big order, or many orders, waiting at one price. When the line stops, the orders were either filled or cancelled. Bubbles on the price line are large trades.

Walls and what happens to them

• Wall holds, price bounces: the orders were real and big enough to stop the move.
• Wall gets eaten: bubbles fire into it and the bright line shrinks as it fills. If it fills completely, price often moves fast through the empty space behind it.
• Wall disappears before price arrives: the orders were cancelled. This is often spoofing, orders placed to influence other traders and never meant to fill.
• Wall moves with price: someone is shifting a large order to stay just ahead of price.

Absorption on the heatmap

When big sell bubbles keep hitting a price and the bid there refills instead of vanishing, a buyer is absorbing the selling. Combined with a falling CVD and a price that will not go lower, this is one of the clearer order flow signals.

Why one exchange is not enough in crypto

Bitcoin trades on dozens of exchanges at once. A wall on one exchange can be small compared with the whole market, and traders can move between venues. DM Charts can show the heatmap and trades from several exchanges joined, so walls are seen in context.

Try it

Open the free order book heatmap, or open the chart, press Ask and type “bookmap look”.