You are about to learn how I used footprint diagrams to helpreinvent my business career.And this after already making 7 figures as a trader!
After reading this post, you will understand the critical edge footprint charts that will help you create context around your business.validate them and improve their inputs and outputs.
The need for footprint charts
In 2008 I completed 5 years of my professional business career at GPC in Chicago. Most of us in the company were pure Tier II merchants.
A Tier II citation gave us the ability to readorder flowand determine logical levels for stops and take profits.
I would use Level II to identify when large buyers or sellers have entered the market and created imbalances, as well as to identify key support and resistance levels.
I benefited from following other time frame traders as they entered the market or taking the S&R levels that I knew many short-term traders were counting on for their exits. I would hide my position in your panic.
then things changed, very fast... In 2008, algorithms started to account for a lot of that.turnover.The algos resulted in many bogus or bogus orders being announced on Tier II, which were removed, making Tier II MUCH less transparent and very difficult to read.
Like most other Tier II pure merchants, I reached a point whereI had to develop new strategies.or my career would be over.
Introduction to Footprint Diagrams - Key Concepts
The footprint charts gave me back the market demand and supply. Footprint graphics allow you tointerpret the flow of orders,similar to how I have used Tier II quotes in the past. Let's take a look at some of the basics and how to read a footprint chart.
The price of a bond depends on whether you want to buy or sell it.
When you want to buy a security, you pay the ask price (the price the counterparty is asking). When you want to sell, the price you get is the bid (price offered by the counterparty).
In the example above, if you wanted to sell an eMini S&P 500 contract, you would get a price of 3,010.25. If you wanted to buy it, you would pay 3,010.50.
Note: The process of buying with a market order is known as accepting the offer or raising the offer. Selling with a market order is called "hitting the bid."
Next, let's take a look at a trading DOM, which stands for Depth of Market. This screen shows all remaining limit orders in the market (announced prices).
In the example below, the current market in ES (eMini S&P 500) is 3010.75 times 3011.00.
The sellers are ready to offer 380 contracts for sale at 3,011.00, the asking price.
Buyers are ready to buy 1,156 contracts at 3,010.75, the offer price.
Since the introduction of the algorithms, many of the orders that sit dormant in the ledger are never traded. Algorithms are constantly adding and removing orders, reducing transparency.
Footprint charts give us the opportunity to see the data that really interests us, the executed orders.No transactions advertised on the DOM.
Observation: In this post, I will refer to the eMini S&P500 as it is the main contract I trade. However, footprint charts are valuable when trading any market, includingStocks, Forex, Oil, Digital Currencies and Gold.
The chart above is a very simple footprint (supply/ask footprint) chart of ES using a 5 minute time frame.
Let's zoom in and studyEntries and exits of a sail track.
In the candlestick above, the closed trades marked in green are the volume that occurred as a result of market orders that hit the bid.
The volume highlighted in red came from the market orders that accepted the offer.
Also note the outlines of the candlesticks that indicate the open, high, low and close of this bar.
Since a stock consists of a bid and a ask, you need to look at the chart diagonally.
When the quote was 2874.00 x 2874.25, 113 contracts were traded at the bid price of 2874.00 and 173 contracts at the ask price of 2874.25.
Point of Control (POC)
ThatCheckpoint, also called POC, is the price level at which the largest volume is traded in a given session.
In the chart below, you can see yellow rectangles highlighting the POCs for each 5-minute session.
We will use the checkpoint to determine if buyers or sellers are the bullies during a given session and to determine areas of support and resistance.
Buying and selling imbalances
What moves the price of the security? It's quite simple... buyer and seller aggression.
If the buyers are more aggressive than the sellers, the price will rise. If the sellers are more aggressive, the price will fall.AMT 101 Theory.
Wouldn't it be useful to be able to do that?Quickly see when big buyers or sellers hit the market?You can!
We can take a look at thisBuying and selling imbalancesin a footprint diagram.
In the table above you can see some of the volumes highlighted in green or red.
Those marked in green arebuy imbalancesbecause they piled on the offer and were more than 300% above the corresponding offer.
Those marked in red aresell imbalancesbecause they accumulated in the offer and were more than 300% above the corresponding offer.
Note: I use 300% for my buy and sell imbalances. Most graphics packages allow you to change this.
Let's take a closer look at the candlestick that formed at 12:50.
You will notice a 607 buy imbalance highlighted in green. A total of 607 transactions were made in the offer against 174 transactions that took place in the offer.
607/174 = 3.49, which is more than 300% imbalance, so the move is highlighted in green.
Footprint-Diagrammtypen
Footprint graphics come in many different types and variations. If you decide to incorporate them into your own strategies, you will probably use several variants. Let's take a look at the main ones and discuss each of their benefits and how you can use them.
Offer/order footprint
The most common footprint chart is the buy/sell footprint. (above) It should look familiar because you've seen it so far.
The biggest benefit of the bid/ask footprint is the ability to identify buying and selling imbalances. We'll look at some examples of how you can use imbalances shortly.
Deltapaw print
Volume-DeltaIt is the difference between purchasing power and selling power. Delta volume is calculated by taking the difference between the volume traded at the ask price and the volume traded at the ask price.
Delta of the volume = volume of the lance – volume of the lance
If delta is greater than 0,The buyers are the aggressors since more contracts are traded in the offer than in the corresponding offer.
If delta for is less than 0,The sellers are the attackers, since more contracts are traded in the bid than in the corresponding bid.
The supply/ask chart we just looked at has the exact same period and period as the delta footprint. Let's compare the candles that opened at 14:05. and you can visually see how the delta is calculated.
You can see at the lowest price point in the bid/ask footprint (left) that there were 52 bid trades and 0 bid trades.
Delta = Volume of the lance - Volume of the lance
0 – 52 = -52 difference
Next we will detail the calculation of the second price level.
238 offers on offer and 135 on offer.
135 – 52 = -103 Delta
Note: Keep in mind that negotiations that occur on the offer represent seller aggression and reduce the delta. Whereas deals that occur on sale represent buyer aggression and increase delta.
Volumepaw print
The third form of footprint diagram is the volume footprint (above), also known as volume print or volume profile bar. A volume profile shows the volume traded at each price level for a specific custom session. In the chart above, blue represents the volume traded at each price level during a given 5-minute session. (POC is highlighted in gold)
You can also mix and match different grip styles. Below is an example of a buy/sell volume footprint.
If you decide to use footprint charts, you'll probably use several variations.
Personally, I use longer-term supply and demand charts when looking for a buy or sell imbalance to trigger a move away from fair value. I don't use delta prints just because I already have a cumulative delta indicator in my speculation chart.
Finally,I use volume profiles(volume footprint) to determine if the price is unbalanced or balanced and to identify support and resistance levels.
You now have a basic understanding of what constitutes a footprint diagram and the different types. Next, let's take a look at how to get started with the implementation.charts in your trading.
The footprint chart strategy
Footprint charts are great for creating context around your current strategies or creating entirely new strategies.
Let's see some examples.
Stacked Buy and Sell Imbalances
stacked imbalancesthey are simply multiple buying or selling imbalances within a narrow price range.
You can see the stacked buying imbalances highlighted by the white rectangles in the chart above. Stacked buying imbalances indicate strong buyer aggression, suggesting a potential breakout or continuation of an uptrend.
Below you can see the stacked selling imbalances highlighted by the white rectangles. Stacked sales imbalances indicate thisstrong seller aggressionindicating a possible breakout or continuation of a downtrend.
I like to have a longer buy/sell period throughout the day to project stacked imbalance zones to determine support and resistance levels. Notice how the price pulled back from the cumulative imbalance formed during the 10:00 bar on the 30-minute chart below. The price briefly touched the equilibrium zone and was immediately rejected and the uptrend resumed. It makes sense, as we know in advance, that there would be aggressive buyers at this level.
Tip: Think of support and resistance as a zone or range, not a specific price.
Unfinished and closed auctions(The business)
Bullish auctions (up moves) end at a price level above which no active buyer is willing to buy. The price has become very unattractive to buyers. Similarly, bearish auctions (bearish moves) end at a price level below which no active seller is willing to sell. If one of these cases occurs, we have a closed auction.
We can use the bid/ask assist chart to determine when this situation occurs. Completed auctions have zero high bids or zero low bids. Zero bid tells us that the price could not go up one bit because there were no passive buyers looking to buy. The auction has ended.
Likewise, if the offer contains a 0, we can see where there were no passive sellers.
At the bottom of the green bar (below) we have a price level where 419 contracts were traded on the bid and zero on the ask. The 419 supply contracts were enough to consume all the demand from the sellers and the price did not drop one iota.
Another example of a full auction can be seen at the peak of the red candle. The 6 contracts negotiated in the tender were enough to consume all the buyer's demand and the price did not rise.
unfinished auctionsthey are represented by the trading volume at the bid price, as well as the bid in a session high or low. Unfinished auctions at significant highs or lows offer a logical benefit, as we can understand the reasons why these price levels may be revised to complete the market auction process.
The 87 contracts purchased by the buyers in the offer were enough to reclaim all of the offer's liquidity and the quoted price, followed by 19 contracts traded in the offer, leaving us with an incomplete auction.
Remember that bull auctions end at a price level above which no active buyer is willing to buy. In this example, the price has not reached a level where active buyers have been exhausted, resulting in an inconclusive auction.
In the example above, we had two incomplete bids at the highs of the 11:45 and 11:50 bars. If you had played a reversal setup in the next few minutes, you could have used incomplete bids as your profit target.
delta divergences
Delta divergences are another great trading pattern.
Delta and price generally move in the same direction. That makes sense, right? If buyers are aggressive in accepting the offer, the price should go up, and if sellers are aggressive, the asking price should go down.
Notice what I often say... So what happens when there is a divergence between price and delta?
On the 1 minute volume footprint below the bottom gauge is Delta Volume. It simply takes the delta value of a session and plots it on a positive/negative bar chart so you can quickly see when price and delta diverge.
In example 1 below, we have a strong negative delta as the sellers were aggressive in accepting the offer, but the session still ended positively. The buyer resisted the seller's aggression and raised the price. A signal of a possible trend reversal or trend continuation.
In Example 2, buyers aggressively accepted the offer represented by the positive delta, but the price closed lower. Sellers managed to resist the buyers' aggression and filled the books with offers that reduced the price. A signal of a possible trend reversal or trend continuation. Of course, this would probably have been a missed signal.
Can you guess what happened in 3 and 4?
If you're interested in order flow, Delta is an extremely powerful tool. So you must dive deeper and readDelta Volume: The indicator of final order flow.
Note: At number 3, we had a strong negative delta, but the price closed higher, which in this case would be a sign that the trend was about to continue. At number 4, we had a strong positive delta, but the price closed lower, which in this case would be a sign that the trend was ending.
*I don't think it's profitable to just trade this individual pattern without any additional context. Be sure to test and simulate each strategy before trading live.
Volume-Footprint-Strategys
The volume always has a story to tell. In fact, I think this is the most important story the market has to tell. If you are interested in trade order flow, then volume is at the center of your strategies.
High volume node and checkpoint
There are four important things to remember when using a volume profile.
High volume nodes (HVN):High volume area compared to surrounding nodes
Low Volume Node (LVN):Low volume area compared to surrounding nodes
Control:Price level at which the highest volume is traded for a given session
Distribution:Price compared to HVNs
High volume nodes act like gravity.They tend to attract the price and try to keep it there.
Vice versa,Low volume nodes are areas of very low gravity.The market often breaks these levels and does not hold for long because there is not much pull (resistance).
Let's look at some examples of how you can use them.
POCs and HVNs are great for tracking your stop loss when you are in position.
Let's say you saw several buying imbalances at 2:20 p.m. m. The candle reached the top of the range it was trading in and she decided to go long. One strategy that can help you stay on trend is to trail your stop behind POCs and HVNs that recently closed above an uptrend or below a downtrend.
The logic behind this is that when the price moves away from a high volume node, it indicates who was the attacker in that price range. Therefore, in an uptrend, you should place stops behind areas where you know buyers have been more aggressive than sellers.
For those of you who follow candlesticks close at new highs or new lows, this strategy will help you reduce your risk.
Next, let's take a look at how we can use HVN to find support and resistance levels.
HVN Support and Resistance
In the daily volume footprint above, you can see how high volume nodes act as support and resistance. Also notice how the price tends to skyrocket in Low Liquidity Areas (LVNs).
Looking at this live chart before the market, I would try to play a breakout setup in the low liquidity area above or below. Remember that there is very little resistance (low gravity) on low volume nodes.
The time frame is key when choosing your support and resistance levels. I am primarily a short-term trader, so the long-term profiles for me are 30 minutes, 1 hour, and 2 hours. Still, I check my daily and weekly stats every morning.
For starters, I would skip the timeframe that you normally trade and set volume footprints on the next two or three timeframes.
For example, if you trade mostly on the 5M time frame, skip the 15M and look at the 30M, 1hr, 2hrs.
reverse profiles b&p
The volume profile allows usquickly visualize possible reversalsand the force of a possible movement.
You can spot possible reversals by the wayvolume profile
"b" shaped volume profileWhere most of the volume circulated and price closed above is a sign of a possible bullish reversal as price moves into the uncovered range away from the average.
"P" shaped volume profileWhere most of the volume circulated and the price closed lower is a sign of a potential bearish reversal. The price goes for the discovery far from average.
You can use them to validate your current setup or create a new strategy with them.
footprint chart software(Updated 2022)
It's time to get your hands dirty and try grip diagrams for yourself! Below are some options to consider for the footprintThe graphics platform.
motivwelle– I've been using MotiveWave for a few years now and I think it's a pretty solid platform.
I wanted to switch to something made by Apple. (I've been using Parallels for years) If you want to tradeorder flowDealer I recommend this software.
Saw-Diagram– I used Sierra for about 10 years before switching to MotiveWave. Sierra calls his footprint indicatornumber bar.Many brokers offer it for free. Anyway, most brokers support this graphics package. 🇧🇷See the list of brokers here)
Sierra's GUI is a bit outdated, but it's still an amazing platform. It's very fast! I rarely closed it, even with insane volatility. I'd probably still be on Sierra if they had a native Apple version.
ninja merchants– Ninja Trader is a popular platform for manyFutures and forex traders and automated traders.I have used the platform and personally am not a big fan of the GUI or design. Also, many of the order flow tools are an additional cost or a third-party plug-in.
book card- Book map is enabledhighly visual trading platformfor Orderflow merchants. Through creative graphics similar to heat maps, you can visualize market liquidity (applied orders).
exoletters– Web based charting platform with many order flow tools. Only available for encryption.
Unfortunately, I didn't see any workprint indicator forThink Or Swim, Trade View, MT4 o MT5.
Think Or Swim: TD Ameritrade offers a great charting package for free, but unfortunately they don't support footprint charts. I posted it because I know there are a lot of people looking for it.
I'd be surprised if ThinkOrSwim and TradingView don't develop footprint charts and moreOrder flow indicatorsin the near future. I know there have been many requests from your communities.
If you have seen footprint indicators for these platformsPlease leave a review!
Conclution
Footprint charts drastically improved my tradingthroughout the years. Implement them correctly and you will see the same results.
Build an entire trading strategy around footprint charts or you can use them to validate your current trading setups.
The best traders in the world find trading easy. However, that doesn't mean it doesn't require a lot of work. It's easy thanks to all the preparation, which is where all the hard work comes into play. And that's exactly what you're doing right now.
You have to design and build your trading strategy to the point where you become a simple processor, filtering the information provided by the market. After all your conditions are met, enter a trade.It should never be a second guess.
that is ifTrading becomes easy.I hope this post helps you on your daily trading journey!
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Adam
20 years professional trader
Founder of JumpstartTrading.com
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