Rain Series - Part 2: Footprint Chart Strategies

Introduction

• Focus on footprint chart strategies.
• Unique acronym: RAIN (Reversal, Absorptions, Imbalances, Non-belief).
• We'll cover setups in this order.
• Reminder: Review part one for terminology and setup, and support/resistance levels will be covered in the next video.

Footprint Chart Setup Overview

• Two charts prepared:
  • Left Chart: Downtrend reversal (reaction to resistance).
  • Right Chart: Uptrend reversal (reaction to support).

Reversal Strategy (R)

• Key Condition: Price returns to the Point of Control (POC) of the signal candle.

• Downtrend Reversal:

  • Signal candle: Red, negative Delta, closes below POC.
  • Enter a short position with a limit order placed one tick below POC.
  • If conditions are missing, do not enter.
  • Finished auction near resistance/support increases probability of success.

• Uptrend Reversal:

  • Green candle, closes above POC, positive Delta.
  • Enter a long position with a limit order one tick above POC.
  • Wait for order fill; may have to wait for subsequent candles.

Absorption Strategy (A)

• Aggressive Setup: High volume and Delta indicate absorption at resistance/support.
• Conditions for Entry:
  • Candle approaches resistance, high volume at top, close below POC for short, or above POC for long.
  • Entry with limit orders one tick below/above POC, depending on direction.

Imbalance Strategy (I)

• Market Order Entry: Focus on imbalances without waiting for POC return.
• Conditions:
  • High volume, significant imbalances on the footprint.
  • Enter immediately after the candle closes at market price.

Non-belief Strategy (N)

• Uncertainty: Price reaches resistance, forms expected direction candle, but does not close below POC.
• Condition for Entry:
  • If price breaks POC, enter with a pending order.
  • If the signal candle is green and does not close above POC, consider a stop-limit order.

Key Points and Recommendations

• Pattern Validity:
  • All setups lose validity if the high/low of the signal candle is broken.
• Patience is Key:
  • Wait for setups to appear; avoid chasing trades.
• Use Patterns Wisely:
  • Patterns can serve as entry signals or triggers for other strategies.
  • Critical market reactions should guide trading decisions.

Conclusion

• "No rain, no trades" - Wait for clear setups based on the RAIN patterns to improve trading outcomes.