One of the biggest frustrations for traders is entering a trade, only to see it immediately reverse against them. That’s why I developed the Hawkeye Heatmap indicator. Its purpose is to give an objective indication of the strength of a trend. By entering trades in the direction of a strong trend, Hawkeye traders can significantly boost their profits and reduce their losses.
In this week’s article, I’ll show several examples of how the Heatmap works and how easily it reveals the strength of the underlying trend.
Let’s begin our discussion with this first chart of the E-mini (from July 3, 2015).
The Heatmap (on the bottom) takes the three variable inputs from the Hawkeye Trend — conservative, normal and aggressive, and shows you visually when all three trends have locked into place. This gives you a clear view of the overall market sentiment and quantifies risk.
Heatmap works in all timeframes and displays four color variations:
- RED – The markets are in a strong downtrend and bearish
- GREEN – The markets are in a strong up trend
- DARK RED OR DARK GREEN – one or two of the trend speeds have locked out of the trend, and the market may be pausing into a congestion area or reversing.
In the example above (where I have the number 1), it shows that the trend is in congestion, as you can see by the white dots.
But, if you look at the Heatmap underneath, it’s in dark red, which is telling us that the bias is to the downside, however, all three trends are not in sync. So, if you want a safer entry, you would wait until point number 2, where the Heatmap goes bright red, and then down it goes.
Similarly, let’s consider the long entry as marked by numbers 3 and 4.
You can see that the trend has gone from bright red to dark red, showing us that the trend is weakening. One or two of the trends have clicked out (hence that’s why it goes to the darker red at point three).
And then, at point 4, the Heatmap goes bright green, and up it goes.
At the number 5, you can see the trend goes flat, the Heatmap goes dark color (telling us that the trend momentum is stalled), and the bias is still to the long side.
Then, at number 6, Heatmap goes bright read and prices immediately drop.
Now, the next example is the weekly chart of Apple, the most widely held stock in America.
And again, you can see at point 1, we have two dots of white, and then, the Heatmap goes dark red, followed by bright red. And bang! Down it goes. At the number 2, the Heatmap goes from bright red to dark red, showing that the trend strength is dissipating. And then, it goes bright green and bang! Up it goes. The same for point 3, where you see the Heatmap goes dark red, showing us that we are in a trend pause. We have entered congestion, and at point 3, Bang! The Heatmap goes green, and up it goes.
At point 4, although white dots come in (showing us that the trend is going flat), the Heatmap gives you the confidence to stay in this trend and continue on up, because it is just saying everything is in place.
Lastly, let’s consider the daily chart of Crude.
You can see that at point 1, we have gone into a trend congestion, and our Heatmap has gone dark red. Then, at point 2, the Heatmap goes bright green, and off we go up to point 3.
At point 3, you can see that the Heatmap has gone dark green, showing us that the strength has gone out of this up move. Although the bias is still to the upside, there is no momentum in this. And the circle that I have drawn around three all the way across to four is something that took me many hours to perfect and find out the answer.
And, I haven’t seen any other software out there that would run for that length of time just showing congestion. Then, at point 4, the Heatmap goes bright red and Bang! In it comes, and the market starts selling off.
So in summary, the Hawkeye Heatmap solves one of the biggest frustrations for traders. That of entering a trade, only to see it immediately reverse against them. By simply entering trades in the direction of a strong trend, Hawkeye traders can significantly boost their profits and reduce their losses.
Now, all of this (and much more) is demonstrated in our Wednesday room by my colleague Randy Lindsey.
So, I cannot encourage you enough to come along to the Wednesday room.
Please contact us at [email protected] for any questions you might have about using Hawkeye Indicators in your trading!