Footprint charts take your technical analysis to another level.
Using Footprint charts will give you an insight into the amount of transacted volume of price, within a candlestick.
Imagine a scenario where price moves down significantly and a long lower wick forms on the candle.
The Footprint chart will show you at what price the majority of volume was traded, during that candlestick.
Let's say the majority of SELL/SHORT volume was traded at the lower wick, significant BUY/LONG volume also came in around that level and since then price has moved back up and closed above that wick.
Footprint charts take your technical analysis to another level.
Using Footprint charts will give you an insight into the amount of transacted volume of price, within a candlestick.
Imagine a scenario where price moves down significantly and a long lower wick forms on the candle.
The Footprint chart will show you at what price the majority of volume was traded, during that candlestick.
Let's say the majority of SELL/SHORT volume was traded at the lower wick, significant BUY/LONG volume also came in around that level and since then price has moved back up and closed above that wick.
Because the price has moved and closed above the majority of new short positions in that candle, this tells us that there are new short positions currently at a loss and that they're probably close to liquidation if leveraged, or being stopped out.
Also during this move, we could see if short positions opened higher up have closed or taken profits.
Combining the two insights seeing; smart traders closing/taking profits on shorts opened at higher prices, with late shorts that entered at the bottom range, we can begin to see the potential for trapped shorts with the probability of a short squeeze occurring, if new long oppositions open with strong volume.
This particular move sees short positions forced to close and cover, creating additional buying pressure in the market.
The buying pressure often leads to an impulsive move up and can be followed with continuation.
The above scenario is just one of many, but regular candlestick charts don't allow for traders to see behind the curtain of liquidity.
When using horizontal support and resistances, Footprint charts can reveal whether acceptance has truly been achieved above or below a key level.
Once again, this is because Footprint charts show us the total amount of traded volume. But more importantly, at which price point that volume was traded.
Footprint charts will give you a huge advantage over the rest of the market, especially those that don't use them (majority of retail traders).
If over 90% of traders lose money, then you should apply Footprint charts to see where that money is going.
By no means do Footprint charts write off Tradingview, it is well worth using both of these great tools simultaneously.
Key Points of the Lesson
UTILITY
Footprint charts allow you to “look inside” a candle ⇒ see the amount of volume transacted at each price.
See where there are many buyers and sellers horizontally ⇒ helpful to determine support/resistance levels.
Determine acceptance above/below a key level.
IMPLEMENTATION
Need footprint software, such as Exocharts.
Use in conjunction with technical analysis at previously determined key levels.
Monitor order flow, including open interest, volume and delta ⇒ particularly useful for day trading / scalping.
PRACTICAL EXAMPLE
TIPS & TRICKS
Bid/ask profile ⇒ useful for day trading to see the live buying and selling interest when approaching a key level.
Left side ⇒ contracts sold at market.
Right side⇒ contracts bought at market.
No “righ” tick size ⇒ higher tick size for higher time frame recommended.
Valua area ⇒ shows a lighter colour range where 68% of the volume in the candle was traded.
Use the OHLC setting to see the shape of the candle ⇒ volume could be mostly in the wick.
Only market orders are shown.
BID/ASK PROFILE EXAMPLE
TAKE HOME MESSAGE
See market orders inside of the candles.
Determine reactions at key levels.
Powerful combination of volume, delta and open interest.