bleeding edge alpha
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Tutorial 1

Aggregated Orderbook Heatmap — How to Read Bias, Actors, and Pressure

The Aggregated Orderbook Heatmap is your *best* “state of the market” panel because it shows you where liquidity is actually sitting (and how it changes), not just where price has been.

This tutorial covers:

  • How to infer market bias from the heatmap
  • How to spot independent actors (real participants vs. noise)
  • How to read pressure and likely “paths of least resistance”
  • Common traps (spoofing, stale liquidity, overfitting the colors)

1) What the heatmap is actually showing

Think of the heatmap as a time series of the *orderbook’s liquidity distribution*.

  • The y-axis is price levels.
  • The x-axis is time.
  • The color intensity represents how much resting size is sitting at/near that price level.

If you only remember one thing:

  • Candles show where trades happened.
  • The heatmap shows where *liquidity wants to trade* (or defend).

Heatmap anatomy

2) Market bias from the heatmap

Market “bias” here doesn’t mean prediction. It means:

  • Where liquidity is stacking
  • Where liquidity is being pulled
  • Which side is *more willing* to absorb

2.1 Bias via “support shelf” vs “ceiling shelf”

  • A support shelf is a bright band *below* price that persists.
  • A ceiling shelf is a bright band *above* price that persists.

Rules of thumb:

  • If supports keep reloading while ceilings thin, bias is up.
  • If ceilings keep reloading while supports thin, bias is down.

Bias: shelf vs shelf

2.2 Bias via pull/stack behavior

Watch what happens *as price approaches* a level:

  • Bullish tell: bids stack (brighten) as price comes down.
  • Bearish tell: asks stack (brighten) as price comes up.

Watch what happens *after a touch*:

  • Bullish tell: bids reappear after getting hit (absorption + reload).
  • Bearish tell: asks reappear after getting lifted.

2.3 Bias via “path of least resistance”

Price tends to move fastest through areas where the heatmap is *dark* (thin liquidity).

  • Bright zones = friction / potential slowdowns
  • Dark zones = fast travel / “air pockets”

A practical way to use it:

  • Identify the next thin liquidity corridor above and below.
  • Ask: which side is being defended more aggressively?

3) Independent actors (real participants) in the heatmap

An independent actor is a participant (or coordinated group) that is *not merely reacting to the last candle*.

They show up as liquidity that is:

  • Persistent
  • Intentionally placed
  • Behaves consistently when price approaches

3.1 Signatures of an independent actor

Look for bright bands that:

  • Appear at a meaningful level (rounds, prior highs/lows, VWAP-adjacent zones)
  • Hold position over time (doesn’t jitter every second)
  • Maintain size through volatility

Independent actor signature

3.2 “Stepping” behavior (laddering)

A strong tell is a participant that repositions as price moves:

  • Bids “step up” behind price in an uptrend.
  • Asks “step down” above price in a downtrend.

This can create a *staircase* pattern of bright zones.

3.3 What *isn’t* an actor

Not every bright band is meaningful:

  • Tiny bands that flicker on/off constantly are often noise.
  • Levels that brighten only when price is far away and disappear when price approaches can be spoof-like.

4) Pressure on the books

Pressure is about *who has to act next*.

4.1 Compression (squeeze setup)

If you see price pinned between:

  • Strong bids below (bright)
  • Strong asks above (bright)

…you have compression.

Compression usually resolves when one side:

  • Pulls liquidity
  • Gets absorbed
  • Stops reloading

Compression / squeeze

4.2 Absorption: the “bright band that doesn’t move”

Absorption looks like:

  • Price repeatedly trading into a level
  • Heatmap staying bright (or re-brightening)
  • Price failing to push through

Interpretation:

  • If price can’t break down into strong bids → buyers absorbing sells.
  • If price can’t break up into strong asks → sellers absorbing buys.

4.3 Liquidity vacuum (fast move)

A vacuum move is when:

  • The next region in the direction of travel is dark
  • The defending side pulls
  • Price accelerates because there’s little to transact against

Use case:

  • If you’re already in the move, vacuums help you *hold* instead of taking profits too early.

5) Practical workflows

Workflow A: “2-minute state read”

  1. Find the closest two bright shelves above and below.
  2. Identify the nearest dark corridor beyond each shelf.
  3. Watch pull/stack behavior as price approaches the nearest shelf.
  4. Only then form a directional bias.

Workflow B: “Actor confirmation”

  1. Mark a suspected actor band.
  2. Wait for price to approach it.
  3. Confirm the behavior:
  • Does it reload?
  • Does it hold position?
  • Does price stall / fail / reverse?

If behavior is inconsistent, don’t force it.

6) Common traps

  • Overweighting color intensity: bright doesn’t always mean “will hold”. It can mean “will get consumed”.
  • Assuming every band is a wall: some liquidity is *advertising* and will vanish.
  • Ignoring time: persistence matters more than a single snapshot.

7) Quick glossary

Term Meaning
Shelf Persistent liquidity band (support/ceiling)
Reload Liquidity returns after being hit
Pull Liquidity disappears as price approaches
Absorption Market orders are consumed without price progressing
Vacuum Thin liquidity zone that enables fast travel
Compression Price trapped between strong liquidity on both sides