Footprint Charts Lecture Notes

Introduction to Footprint Charts

• Candlestick charts are common, but footprint charts provide deeper insights.
• Footprint charts show interactions between buyers and sellers within each candle.
• Objective of the lecture:
  • Understand what footprint charts are.
  • Learn about different types of footprint charts.
  • Analyze the auction process between buyers and sellers.
  • Utilize footprint charts effectively.

Understanding Footprint Charts

• Candlestick Chart vs Footprint Chart:
  • Candlestick shows price movement, while footprint shows transaction details.
  • Each candle contains data about all transactions that occurred during that period.

Structure of Footprint Charts

• Left side: Bid
• Right side: Ask
• Aggressor: The participant who places market orders (aggressive).
• Passive Participant: The one placing limit orders (passive).

Key Concepts

• Aggressive vs Passive Participants:

  • Aggressive Participants:
    • Place market orders.
    • Example: Buying 167 contracts at a price indicating aggressive buying.
  • Passive Participants:
    • Place limit orders.
    • Example: Selling at a price without urgency.

• Bid and Ask Analysis:

  • If 479 orders are filled on the bid, sellers are aggressive.
  • If 975 orders are filled on the ask, buyers are aggressive.

Analyzing Interaction of Buyers and Sellers

• Key levels matter.
• If aggressive buying occurs at a key level without market movement:
  • This indicates passive sellers are absorbing buy orders.
  • Excess supply leads to market movement down.
• Volume analysis is critical to gauge market sentiment.

Types of Footprint Charts

1. Bid and Ask Footprint

   • Shows aggressive buying and selling.
   • Color-coded to indicate aggressor side.
   • Red means more aggressive selling; green indicates aggressive buying.

2. Customization Options:

   • Platforms like ATAS and Sierra Charts can be used for footprint analysis.
   • Customizable settings for volume, delta, etc.

Delta in Footprint Charts

• Delta: Difference between buy and sell orders.
  • Example: If 10 buy orders and 20 sell orders, delta = -10.
• Understanding delta helps identify market control.

Key Level Analysis

• Focus on price action at high and low points:
  • Unfinished auctions indicate potential price movement.
  • Absorption: Passive buyers absorbing aggressive sell orders.

Practical Application of Footprint Charts

• Use footprint charts to identify:

  • Imbalances in supply and demand.
  • Areas of absorption and potential exhaustion.
  • Unfinished auctions at significant price levels.

• Important Note:

  • Footprint charts are not a Holy Grail; they are tools to assist in trading.
  • Context is crucial: understand the market dynamics and history.

Conclusion

• Trading is an art that requires understanding of market participants and behavior.
• Use footprint charts in conjunction with market profile for better insights.
• Keep refining your understanding of order flows and participant interactions.

Call to Action

• Comment for more topics if you want further discussions.
• Thank you for tuning in!