Great insight, thank you for the links! I will definitely check the.
I am not completely sure though if by heatmaps we mean the same thing. I might be using the term wrongly. You mentioned DoM. That is what I am visualizing with "order book heatmap". I agree it does not provide complete info about DoM due to existence of hidden orders and traders executing orders real time. I believe ask/bid ratio can be complementary indicator of changing volume, canceling pending orders, etc. I might be wrong, no argue with that.
The Heatmap I'm talking about has been "the latest greatest tool available to traders" for the last couple of years. If you look back at the history of it when indicators like MACD first came out snake oil salesmen were selling it for $10k. Then the chart package makers started to include it free, so the snake oil men moved on to the next big thing, rinse repeat.
I'm aware of Bookmap Xray
https://bookmap.com/ $49 - $99 a month, being one of the first, now everyone is doing it and it'll be free in all charting packages in a couple of years.
In the end, all Heatmaps are is a visual representation of where orders were and that information is of no use to a trader at all. What I want to know is what orders are there now and do they get filled. So whether it's a chart of what trades occurred in the past or what orders were in the past I don't want to know.
DoM is the trading interface. TT that I mentioned before call it MD Trader but they get very protective of their copyright and patents so everyone else has to call theirs a DoM.
They show all the information a trader needs in numerical form and that's all the pro trader will look at.
Watch this:
https://www.youtube.com/watch?v=JXaDX-vtAw0I am still backtesting the trading history heatmap but it looks like a good indicator of market sentiment and trend strength. Do you have any papers or blog posts opposing this charting style?
Not that I can find right now, I'll have a deeper dig, but this mainly comes from conversations with traders.
Edit: I found a decent review of Bookmap Xray
https://www.tradingschools.org/reviews/bookmap/tl;dr
Pros: Stable software that does exactly what it is supposed to do: display trading volume.
Cons: The information from the graphical display is a nearly useless, set of new age mumbo-jumbo, "market feelings", and hard to prove or disprove trading concepts. A playground for the wandering imagination.