Order Flow Intro: Footprint Chart Basics

So let's talk about the footprint chart. And really quick, if you're the type of person that requires some type of slide supplementation while learning, make sure to watch the next video. So the next video after this one is our original footprint video where we do have the slides to go along with the images. But what we're looking at right here is very simple to understand. It looks complex, it looks difficult. There's a lot of numbers, a lot of noise, but trust me, it's a very simple concept. What we have that you can see is a bunch of numbers, but under that there's the actual candle. So you see this candle outline. We have a candle that has a very long wick and a very small body. So I'm going to tell you just how helpful a footprint chart is right now. So we're looking at a candle that has barely any body and has a lot of wick. Now if you're like me, when you see a candle structure that has body and then has a wick, my first thought is that the wick looks weak right there. Looks like because of the size. Sort of like this mental trick that a lot more activity would have taken place within the actual candle body. Now that's a mistake. And if you're just going off a price action alone, you might be able to gauge certain strength or weakness. Especially when we have different types of candles forming relative to either support or resistance, or through support or resistance. But you don't really get an honest representation of what took place below the surface. You don't know if you see a candle like that, which ultimately looks like this, if you can't see the green because it's too light. So you don't know if you see a candle like this whether or not most of the volume took place in the body or whether or not it took place at the extreme at the high or within the center of the wick, or if there was any activity in here whatsoever. And it wasn't just some liquidation candle. So when we're looking at a footprint chart, we get a very broken down, atomized view at what took place within each candle. So right now we're looking at a half hour candle period. But this could be on a five minute chart, it could be on a one minute chart. It doesn't really matter. What we're seeing is for that chart setting where the volume came in now on the right side of this candlestick. So the volume right here, that is the volume at the offer. Those are aggressive buys. Lifting the offer or hitting into the ask, and that can be from traders opening positions by buying or getting out of positions as well. So if you think about it, a short closing out aggressively is going to show up as a market buy order. So the volume on the right is aggressive activity lifting the offer. Okay. You just have to remember that it's activity lifting the offer. What that means is if we're looking at an order book, let's say that this is our order book and we have the market price in the center and down here we have, let's say we have the bid. Okay? And then up here we have the ask. The volume on the right hand side is taking from the ask. Okay? These are active orders, these are aggressive market orders that are hitting into the passive limit orders in the ask. The volume on the left hand side is the opposite. Those are aggressive selling orders hitting into the bid. So aggressive orders hitting into the bid, again hitting the passive side. So the order book, those are advertisements, Those are advertisements to buy and to sell. Okay, Passively limit buy orders, limit sell orders. It's resting liquidity. When we're looking at this volume right here, what we're looking at is active order flow. We're looking at market orders. So again, on the left hand side we have volume at the bid. So those are aggressive sells heading into the bid. On the right hand side we have volume at the ask. Okay? So from this candle alone, you could see that even though this was all wick, that there was a great deal of volume within here. A great deal of volume. And most of the volume actually occurred at the high. So we need to keep that in mind because when we revisit this level, if we revisit this level intraday, we'll know that this is likely an area that should serve as resistance. So if price approaches this level, it should serve as resistance. And if we pass it, it'll likely lead to a squeeze. Okay. Because what we have is likely traders that were getting short up here, we could see where most of that volume came in. And they'll likely have to get out of their positions if we close through there. So another thing that you might notice is that I have different text color. So you see that there is green text right here, there's black text right here, and the rest of the text, the standard text, is white. So what this is indicating to me are imbalances. Now if you're looking at the volume across this candle, you're going to look at it at each price level and say, okay, this level right here between, let's say for example, 9309-9311, right around there, you could see there is zero volume at the bid, meaning no aggressive selling up here and no passive buying. And there's 2.8 million contracts, 2.88 million contracts at the offer, meaning that was an aggressive buy and that this was offered. So there is a passive seller right here. So the total volume for this level is roughly 3 million contracts. So it's roughly 3, it's 2.8. 2.88 to be precise. But what this doesn't show us is the imbalance in activity that took place while price was split. So what we're looking at when we're looking at an imbalance, if we split this right here because we're, we're looking at a green colored text, what that says to me is that when price was split right between this level, meaning that this was the offer and that this was the nearest ask, there was a much larger imbalance in activity that hit the offer compared to the ask. So as price moved up, buyers got way more aggressive right here than sellers were to sell. So then sellers were at this point hitting into the bid. So my settings are that my green text means that there's three times the buying activity relative to the current bid that at that moment is sitting in the passive order. So again, as price is split at that level, so we'll just find out what that exact level is. So that level right there is 9303. When price is at that level, there was much more buying activity at that level than there was selling activity. The same can be said if we're looking at one of these black text portions. So what we're seeing right here is that when price was split right here between what we're looking at is 9287. So you can't see because the margin is off the screen. But when price is right at this level, there was more than three times the aggressive selling activity than there was buying activity. So imbalances are very useful and we're going to get into those as we get further down the line in the coursework. But this is all you're looking at. When you're looking at a footprint, you're getting an honest representation of what took place below the surface. Now, your footprint can be set up as exactly as you want it. You can have your imbalances set up to be 400% or 4 times value, or 2 times value. As you can see mine, I have the point of control highlighted with a black outline. I have the colors of mine that are based on Delta. And. And we'll get into Delta in one of the next videos. But what, again, this is showing us is the exact activity that occurred. None of this is spoofed. None of this is advertised. This is all buying and selling activity that actually hit the tape. So what we mean by that is that this was actually transacted. When you have an offer or bid, all that is is an advertisement. It's saying, hit me. But it's not transacted order flow. It's pre transacted order flow. It might have intentions of getting filled, but it also might have intentions of manipulating price or influencing participants and then pulling. So what the footprint shows us is exactly what took place at what precise level, and the level of imbalance between this structure as price is moving upward and downward.