This is technically a lesson from the room, but I’m going to type it out rather than just post a screenshot like I do for most of them.
Even if you haven’t been trading for a while, I’m pretty sure you’ve seen “Heat Maps”. Many people look at them like they look at some geological survey of an ancient civilization…a map of what is/what once was.
I treat them differently. If I’m looking for day-trade ideas, I use them as real living and breathing maps; even GPS if you will…
With roads and guides; pathways to the next step.
Here’s one I took at 11:00 AM today. I took it off FinViz, but there are many other sources of them, including
Ok. So today is a sea of red. But that shouldn’t allow us to stray too far from the path of this quick lesson.
So how do I use this thing for day-trade ideas?
Well to start, that’s a heat map of the S&P 500, broken down by sectors. You can watch the sector ETFs (e.g. $XLI $XLU $XLK $XLP); but I typically just watch $SPY (or the future version, $ES_F).
At the time of this writing, the S&P is down around 40 points. Hence all the red.
But not everything is red nor the same shade of red. The trick here is simple.
If the index starts to move up strongly, I would go back to this heat map and find things in light green or the darker shades of red. I would watch some of those names, maybe compare them to the options flow on the day, but first I would throw them on a watchlist quickly.
Sometimes I put them on a watchlist before the move and that is indeed the smarter thing to do so you’re prepared when the move comes.
Then, if the index moves up strongly I’ll hit those names as they have arguably the most to gain and aren’t as weak as those in bright red.
These trades are almost always day-trades. If the index feigns weakness or the stock does, take your profits and run.
The same holds through for the other situation, though rather than light green, put most of your attention to the darker red and grey tickers.. As the index drops, they have relative weakness to those things in the dark greens and the greens.
Since the bright reds are already down