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Footprint Charting Secret - Volume and Price in One Place
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Footprint Charting Secret - Volume and Price in One Place

created Natalia BojkoJanuary 22 2021

The vast majority of "Western" traders have succumbed to the Eastern fashion, adapting Japanese candles to trading. Previously, the main representative of the price was the bar chart. However, both types have their followers. In addition to them, we can distinguish extremely simple in use, but also data presentation, ordinary line graphs and slightly more interesting renko, about which you can read here. Today, however, we will focus on an extremely rare type of data presentation - footprint. Before you go on to the rest of the text, take my word for it that they look quite unconventional and intriguing. Nevertheless, we will not be using them just to show off to other traders with a complicated trading system. In fact, they are a very useful form of price analysis. So let's get down to business.

What are footprint charts

How is futures trading done? Very similar to the stock market in the continuous trading phase. Put simply, by submitting bids by market participants. How do traders trade? Stupid question, right? By clicking the buy or sell button and the order falls on the platform. Imagine you want to buy on EUR / USD for 1 flight. Of course, the purpose of this item is to generate the assumed profit for us. Whether we buy a contract for Eurodollar at a price of 2-4 pips lower or higher will not make any difference to us, especially if we trade from the proverbial "hand". Now picture the second situation. We want to buy EUR / USD again, but this time we are interested in a position of 300 contracts. Will the 2-4 pips difference in the desire to maximize the returns on investment be a triviality worth considering? Not necessarily. This is where the footprint chart comes in handy. 

We are lazy ...?

Price is the result of the struggle between supply and demand. Based on the chart of changes in quotations over time, we are able to determine which of these forces has an advantage in the market. Most traders use technical analysis. One of the easiest methods of determining the direction of price movement is to draw a trend line. How many of them will be, at what intervals we will use them, at what angle etc. is not important. It is important what we do it for. Of course, our ultimate goal is to find an opportunity to make a profitable position. However, the very use of tools is purely for prognostic purposes. Technical analysis is pleasant and friendly for traders because some of its methods do not require special learning. This is human nature. We like shortcuts :-). Nevertheless, with the help of candles, bars or a regular line, oscillators or averages, we will be able to read how long, for example, it will take an extreme market buyout? Often, when the quotes of a given instrument break new highs, the oscillators hit extreme values. However, the rate does not drop even by a dozen pips. Why? When will he do it? The oscillator will not answer this question, its purpose is completely different. The footprint charts analysis will help you answer these questions. 

Reading from the tape on the chart

Somewhere in the old movies about the stock market, you must have seen brokers and analysts reading the so-called the tape with the current company prices. We also currently have available (especially popular in day trading on shares) order books. I must admit that they were forgotten in the analysis of currencies a bit due to extensive data for analysis. However, there are still supporters of this method, which the footprint uses in its graphic presentation. Let's get straight to the point. In the graphic below you have an example of a footprint candle. 

How should such a candle be read? Just like the order sheet. There are buy orders on the left side of the candle and sell orders on the right. We read candles exactly with the arrow movement (from left to right). To make it easier (this is also the correct way of reading)  let's start from bottom to top. 0,254 contracts were bought at 18, 5 were sold. Let's take this as a logic. Why was the price movement up (bullish candle wick)? Because more contracts were bought than sold. We had a greater demand. Let's move on. Price 0,255. At this level, 5 contracts were bought and 1 were sold. Price 0.256, 14 contracts bought and 10 contracts sold. Still the difference in favor of buyers is addition, hence we create a rising candle. I think everyone can be able to read demand movements.

Let's move on to the upper wick of the candle. We can read that at the price of 0,259, 12 contracts were bought and 20 were sold, there are no more orders from buyers (0). Therefore, here we have more sellers than buyers, hence the downward (wick) move.  At this point it is worth mentioning what the 0 is, which we see at the end of the candle on both the upper and lower wick. This means that there are no counter offers at this price. These are usually good barometers to help you spot a market reversal. 

Where to get these charts?

Generally, the analysis of the order book itself will not fully replace the chart, in which graphically (therefore more accessible for most people) is shown what is on the proverbial tape. So how do you get footprint charts on your MT4? Additional software is required for this. Currently, no broker offers this type of charts. There are over 10 types of footprint alone. Some applications allow you to test them for a dozen or so days for free. We will certainly test them for you soon! Let's go over to one of the models of the appearance of such a chart. 

example footprint charts

Source: xtick.com

By and of themselves, they take different forms depending on the software. Importantly, they are unique due to their properties. For example, when you see a wick forming on a chart, how do you know how many actually trades have been completed there? Whether it was created because there were no, for example, purchase orders, or because more capital issued a solid package of orders. 

Additionally, these charts are quite flexible. You can additionally set up states of market imbalance in them. Then the numbers additionally turn red or green. The imbalance condition will be the difference between the number of buy and sell orders for the clear benefit of either side. It is then much easier for us to notice significant changes at a specific price without a deeper analysis. 

Is the footprint plot alone enough?

There are generally complete trading strategies for footprints. But looking at the prospect of using footprint charts for a different strategy than scalping, it is worth using technical analysis as a support. Combining the resistance and support in the chart with the signals from the volume and price analysis is an effective method of catching reversal moments. Footprints are often supplemented with calculations of various other parameters. Therefore, we can often see ridiculously different plots of the footprint. Here are some of the most popular varieties:

  1. "Track profile" - exactly the graph shown above. It shows traders the volume at a specific price as a vertical histogram. 
  2. the degree of purchase / sale - adds a color to the volume (parameters can be set), thanks to which you can find out who the price movement wizard is on the market without a deeper analysis. To put it even more simply, which side - of supply or demand - currently dominates trade. 
  3. delta footprint - a particularly popular variety on stock markets. Delta calculations mainly appear below the graph. Thanks to them, we can spot divergences, and thus possible price reversals.
    delta footprint

    Source: xtick.com

    Its visual representation can also be different. Sometimes its calculations are located only below the graph, and sometimes it is so that a delta trace can be marked. What does she help with? Let's start with delta displaying the net difference between the volume initiated by buyers and the volume initiated by sellers for each price. It therefore helps to identify a trend and provides general information as to whether it will continue. 

  4. volume trace - the situation here is similar to the delta. Perhaps most often the volume trace is displayed on the left side of the chart. Unlike the volume histogram in traditional charts, the volume trace segments a volume not only by time but also by price. This chart is designed to help traders identify market surrender points. 

All of the above parameters largely depend (the appearance and presentation of data) on the downloaded software. Nevertheless, the charts themselves are a very good tool for reading market behavior, moments of reversal, and provide answers to the question of how the demand is shaped at specific price levels. 

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About the Author
Natalia Bojko
Graduate of the Faculty of Economics and Finance, University of Białystok. He has been actively trading on the currency and stock markets since 2016. It assumes that the simplest analyzes bring the best results. Supporter of swing trading. When selecting companies for the portfolio, he is guided by the idea of ​​investing in value. Since 2019, he has held the title of financial analyst. Currently, he is the co-CEO & Founder in the Czech proptrading company SpiceProp. Co-creator of the Podlasie Stock Exchange Academy project (XNUMXrd and XNUMXth edition).