The MarketDelta Blog

There are currently ten different types of Footprints®. The four most popular by far are Bid Ask, Delta, Volume, and Footprint Profile. Each offers a little different way of viewing the market from the other and it will be these four we focus on below.

BID ASK FOOTPRINT – The primary benefit of this Footprint® is that it gives you very detailed price/volume information. It is constantly showing order flow to the bid and order flow to the offer in the form of Bid traded volume x Ask traded volume. For somebody who is very good mathematically and a quick thinker, they would be able to gauge the Delta and Volume Footprint® values from just looking at the Bid Ask Footprint®. This is because the Delta Footprint® is simply A – B and the Volume Footprint® is B + A.

The benefit the Bid Ask Footprint® gives the trader is the volume trading on the bid or at the offer during any given time and the acute ability to monitor order flow.

DELTA FOOTPRINT – The primary benefit of the Delta Footprint® is its ability to give the trader a definitive buying pressure or selling pressure gauge at each specific price. The Delta is calculated using the following equation: Ask traded volume – Bid traded volume.

Viewing the Delta Footprint® will show a trader which side of the market is showing more aggression, thus the potential to move in the direction of aggression. One thing the Delta does not do is show you the total volume traded at that price.

Example: The delta could be 50, meaning 50 more contracts have been bought as a result of the buyer being more aggressive and lifting that price when offered. However, the total volume could actually be 2050, meaning 1000 x 1050. You must be aware that delta is just showing you net buying or selling pressure at price. A great advantage is that when delta is large (either a large positive or large negative) you know there was very lopsided trade at that price and possibly indicating institutional activity at that price.

VOLUME FOOTPRINT – The primary benefits of the Volume Footprint® are that you now know volume at each price as the market rotates back and forth. Traditionally traders have used volume histograms on time based charts to follow volume; however this doesn’t show at what price all the volume was transacted. It’s very critical to know if most of the volume on a five minute bar was done near the high or low of the bar. In a rising market, if a majority of the volume is done near the high of the Footprint® bar this could signal follow through as price continues to rally.

A popular strategy is to view 30 minute bars spot volume clusters. These clusters will often be support or resistance on a re-test.

FOOTPRINT PROFILE – The primary benefit of the Footprint Profile is vertical distribution of volume it creates in whatever time frame you specify. This allows traders to apply all sorts of strategies, from seeing “fat” (high volume areas) and “skinny” (low volume areas) or seeing the shape of the distribution.

Some of the shapes that would be significant would be “P”, “b”, and normal bell curve. These all have different meanings and when combined with the coloring coding information the Footprint provides they can provide valuable insight for traders.

SUMMARY
Our findings have been that each Footprint® provides unique information and that some traders will prefer one over the other. We recommend experimenting with each of them and find which one fits you best. Start with understanding what you are looking at. Volume Footprint® is a good starting point because we are all familiar with volume. Each trader will benefit differently as they gain experience and increase their abilities. Most important is to be patient as you learn this new chart form. Nothing of benefit comes easy, and the hard work will pay off as you spend time with this cutting edge analytics trading tool.

We often talk about using the Volume Breakdown indicator because it offers so many different ways to view volume and delta. Every day there are great examples and here is one that jumped out at me this afternoon.

In this example we see a basic retest with rejection. The Delta Bars show how the buyers stepped in on the retest. Also, note how there was larger volume in the Footprints. When this happens it very important because unless price is able to break through and trade lower, there is potential for a nice bounce because traders are caught selling in hopes of a breakout lower. This shows a key benefit of the Footprint because the volume is presented intrabar, price by price, allowing for better reaction time to trade opportunities.

I have included the chart definition in case you want to download this chart. If you are not running the recent beta or candidate release (www.marketdelta.com/downloads) then the Quote Board indicator at the bottom of the chart will not be available.

Here is the chart definition for this chart.

As I am typing this article, a very similar trade using the delta bars occurred again.