Function in Focus – Footprint Charts

Have you ever looked at a Footprint Chart and wondered what all those numbers mean and how to take advantage of them? In this video, we will take a look at how Footprints Charts can help you with your trading, giving you an information advantage over the traders using candlestick charts.

Look at Footprint charts, as a window that allows you to look inside a candlestick. A candlestick is only capable of giving you four prices, the open, the high, the low, and the close. Footprint charts, on the other hand, allow you to know the volume traded per price on the buy and the sell side. You know exactly at which price those buyers’ and sellers’ interest was.

With that information, you will be able to place your orders at price areas that have meaning to traders, where they put their hard-earned money at play, and not at random areas, usually, highs and lows that are randomly chosen depending on the time interval selected, 1 min, 5 min or 30 min. 

Notes:

Hi all,

Today we are going to talk about footprint charts. Many of you already heard about it and looked at it, but maybe all those numbers might have scared you, and you simply put it aside and decided to move on.

Today, I’m going to bring you back to it because it can really help your trading.

Look at the footprint chart, as a window for you to look inside a bar, inside a candle stick. If you look at a footprint side by side with a candlestick chart, you can see both are showing the same price range traded inside a specific time, in this case, 5 minutes. You can see that the open, the close, the high, the low, and the volume are exactly the same.

Let’s make things a bit simpler for now, and let’s remove the numbers from the footprint chart, let’s only look at the histogram. This histogram shows the buy and the sell volume traded per price, and let’s compare it with the same candlesticks.

When we look at these candles, the only thing we see are the high, low, open, and close, nothing else, but as we said earlier, footprint charts are like a window that allows seeing what has happened inside the candlesticks.

By just looking at the histograms, we are looking at mini volume profiles, per bar, which can help us pinpoint areas of interest for us to trade. We can see these peaks, which show areas where there was a lot of interest from buyers and sellers, and a lot of volume was traded. The valleys, show areas where there was very little trading interest, the price moved very quickly through it, and very little volume was traded. Usually, this happens because one side of the market pulls their orders, and the other side easily takes all the remaining orders.

Let’s go back and search for peaks and valleys, from where we can draw possible areas of support and resistance, which we can then use to help in our entries and exits.

Going back a couple of bars, we find this big bar, where very little volume was traded below, there was very little interest in trading these prices. This is a case where sellers pulled their orders from the market, and buyers simply took everything that was available, and only at 7.75 and above, interest started to show up, and we can see that by the high traded volume area in the histogram.

So, we can look at the 7.75 as a support area, and let’s place a line on it, so we can observe how prices react to it.

We can see a positive first test, we then broke it by 4 ticks but reacted positively to it, and then we broke it, and interest started to show up below that area. Again, look at the high traded volume. And actually, we can adjust that line we drew, and pull it down to 6.75, where the trading interest started to show up.

Moving forward, we can see that when prices moved back to that area, the interest in trading was below it, not above it, and since then, we’ve been trading in a trading range for the last 30 min.

Let’s now switch ON the numbers again. They indicate the volume traded on the bid and offer side, per price. Notice how when we retest the 6.75, the first time only 1 lot traded into it, and the second time only 3 lots traded into it. Clearly, not much interest to buy above that price at that time.

Let’s look now at the current bar, you can see that 16 lots were sold at 2.25 and nothing has been traded yet on the buy side at 2.25. But something you need to pay attention to is that the footprint should be read like we read the DOM, diagonally. So we have 16 lots sold at 2.25 and 29 lots bought at 2.50. This is what tells us which side is showing more strength, the buy or the sell side.

Professional traders tend to use only the DOM, but in prop firms, some also use the footprint because in a way, the footprint, is showing the DOM history.

When we look at the DOM, in a fast market, we might have difficulty remembering where prices were 1 minute ago, but with the footprint, we can see it and know exactly what volume was traded there at the time, per price.

I find it more advantageous to combine the DOM with the footprint, using the areas of support and resistance we drew earlier, and then, on the DOM, we look at the exact volume being traded in those areas, seeing if the volume being traded, indicates a possible breakout, a head fake, or even falling short and pullback. But others might decide to only use the footprint because it is more visual than the DOM, and there’s nothing wrong with that. We are all different.

Let’s now look at its settings.

The data settings are common to all chart types. It is where you select your chart interval, in this case, we have a 5-min chart, how many days you want to load, and a couple of more options that I think are self-explanatory.

And below we have the footprint chart settings themselves. Just to highlight some of them, by default we show each bar histogram, but you might prefer to also see the background color. As you can see, this makes it a bit harder to see the histogram, so you might want to disable the histogram and just have the background color.

We then have the Tilt mode, which has become a love and hate thing among our customers. And I know, it looks a bit odd, but in reality, it does facilitate reading the order flow. Remember what we said that footprints should be read diagonally, and this is what the tilt mode does. When you look at both modes side by side, you can see how easier it is to read the tilt mode. We are displaying the data diagonally, there is no need for you to look up and down, between the bid and offer when looking at the standard footprint view as seen on the right side.

Let’s now look at the Histogram Diagonal option, which allows you to also read the standard footprint view, diagonally. So again, we have both views side by side, and you can see how on the right side we have the standard view, where we need to look at the 12 lots traded at the bid and then look at the 52 lots traded at the offer above, whereas on the left side, with the Histogram Diagonal option selected, we have the view similar to the tilt option, we are seeing the 12 lots traded at the bid and the 52 lots traded at the offer side by side.

And finally, I want to talk about the Minimum Imbalance Volume and Imbalance Percentage options. This should be adjusted based on the symbol you are trading. The Minimum Imbalance volume option is what it will be considered to calculate an Imbalance. For this example, let’s select 50 lots. The Imbalance Percentage option is what the other side needs to exceed, so it can be highlighted, indicating this way that we had an imbalance either from the buy side or the sell side. Let’s maintain the 200 for now. Looking at the chart, you can see that some numbers are now highlighted in yellow. By the way, you can customize all colors down here.

Something you need to be aware of, as we have the setting right now, the Imbalance is being read or calculated horizontally but as we discussed before, it needs to be done diagonally, so for that, you either need to switch to the Tilt mode, or enable the Histogram Diagonal option.

Summary

In summary, Footprint charts will allow you to pinpoint your entries and exits by looking at the volume peaks and valleys (also known as volume nodes) per bar. From there you can find areas that can be looked at as support and resistance and then see if you get a good trading setup while looking at the order flow when prices retest those same areas.