# Heatmap: What it Means, How it Works, Example

> **Definition**
>
> A heatmap is a graphic that uses a system of color-coding to indicate degrees of intensity, making it easier to see trends or patterns.

## What Is a Heatmap?

A heatmap is a two-dimensional visual representation of data using colors, where the colors all represent different values.

A heatmap can be used with all sorts of data, from the [real estate](https://www.investopedia.com/terms/r/realestate.asp) market representing the number of foreclosures to the spreads of [credit default swaps](https://www.investopedia.com/terms/c/creditdefaultswap.asp) (CDS) to webpage analysis reflecting the number of hits a website receives.

### Key Takeaways

*   A heatmap is a graphical representation of data in two-dimension, using colors to demonstrate different factors.
*   Heatmaps are a helpful visual aid for a viewer, enabling the quick dissemination of statistical or data-driven information.
*   On the downside, heatmaps provide only selective information, therefore clouding the big picture on an issue; heatmaps are also often prepared when only preliminary information is available.
*   While heatmaps are used in various industries and circumstances, they are commonly employed to show user participation on a website.
*   Heatmaps became trendy after the recession that began in 2008.

## Understanding a Heatmap

Heatmaps were used as early as the 19th century in statistical analysis and grew as a useful tool for almost every industry and field, including medicine, marketing, engineering, and research.

As a practical example of how heatmaps can be helpful, they became trendy during the recession that began in 2008. Many people used heatmaps to quickly see the foreclosure rates in various states and compare them to heatmaps from previous months to see if foreclosures were rising, falling, or staying the same.

Heatmaps are helpful because they can provide an efficient and comprehensive overview of a topic at-a-glance. Unlike charts or tables, which have to be interpreted or studied to be understood, heatmaps are direct data visualization tools that are more self-explanatory and easy to read.

Heatmaps can also be more user-friendly for consumers. In particular, they benefit those consumers not accustomed to reading large amounts of data because they are more visually accessible than traditional data formats.

## Heatmap Example

Heatmaps can be employed in a variety of situations and industries. For example, a heatmap of [foreclosures](https://www.investopedia.com/terms/f/foreclosure.asp) data could show parts of the U.S. experiencing high foreclosure rates in a dark color and states with low foreclosure rates in lighter colors, which could be useful for real estate professionals looking to understand more about the market and identify market trends.

A color-gradient legend typically accompanies a heatmap to specify the data and help the map reader understand the data. Heatmaps are also widely used in webpage industries to show where users are clicking.

> **Important**
>
> Heatmaps can be used to quickly view foreclosures across the United States.

## Special Considerations

However, heatmaps can also be misleading because they often involve large amounts of data and may not include all of the necessary information needed to make an accurate assumption about the trend. Heatmaps can show that certain situations happened but do not provide insight into why the situation occurred, what factors were involved in the situation happening, or what the forecast for the future will be.

Heatmaps are often made before all of the data on a topic is released to provide some preliminary analytics for viewers, so they have to be read with that caveat in mind.