Overview
This lecture explains how to use orderflow and footprint charts to gain a deeper understanding of market activity beyond standard candlestick charts, improving trading precision and decision-making.
Introduction to Orderflow
- Standard candlestick charts show only price movement, omitting crucial orderflow data.
- Orderflow charts provide details on actual buy and sell activity at each price level.
- Market success depends on accessing and interpreting the richest available information.
Market Mechanics and Liquidity
- Two main liquidity types: aggressive (market orders) and passive (limit orders).
- The order book displays passive liquidity (buy/sell limits at different prices).
- Price moves when aggressive buyers or sellers consume passive liquidity at a given level.
- Current price is determined by the last executed order.
Footprint Charts Explained
- Footprint (orderflow) charts display contracts executed at each price and identify aggressive trading.
- The yellow box marks the point of control (most contracts executed at a level).
- Shifts in the point of control signal market sentiment (bullish/bearish).
- Imbalances (colored numbers) show when activity is much heavier on one side of the market.
- Imbalances are calculated diagonally between bid and ask, highlighting zones of aggression.
Key Concepts in Orderflow Analysis
- An “unfinished auction” shows numbers on both bid and ask at the same price, hinting at future price revisit.
- The Delta (difference between buy and sell volume) indicates which side is dominant at a price level.
- Absorption occurs where large passive orders “absorb” aggressive orders, revealing strong defenses.
Practical Use of Footprint Charts
- Settings can show total volume, delta, and visualize high-activity price areas.
- Analyze patterns (like RNI — response and initiative) for signs of major participant moves.
- Imbalance clusters and fair value gaps reveal high-probability trade zones.
- Orderflow gives more precise entry/exit levels compared to standard price action analysis.
Trading Patterns and Interpretation
- Initiation and absorption phases are key to understanding large trader behavior.
- Imbalances and exhausted buying/selling suggest likely reversal or continuation zones.
- Volume and order activity peak at session close, not open.
Key Terms & Definitions
- Orderflow — data showing real buy/sell orders at each price level.
- Footprint Chart — a chart displaying executed volume and orderflow at price increments.
- Aggressive Order — a market order that takes liquidity from the book.
- Passive Order — a limit order waiting to be filled at a set price.
- Point of Control (POC) — price level with the highest volume.
- Delta — difference between buy and sell volume at a price.
- Imbalance — significant difference in volume between bid and ask, indicating aggression.
- Absorption — passive liquidity soaking up aggressive trades.
- Unfinished Auction — both bid and ask have volume at the same price, suggesting revisit.
Action Items / Next Steps
- Review templates and settings for your footprint charting platform.
- Consider subscribing to the recommended Telegram channel for updates.
- Watch previous or upcoming videos in the orderflow series for deeper learning.