On May 6th, 2010 the markets experienced something new. A algorithmic trading system(s) crashing the market lower in what has been referred to as the flash crash because of the speed at which it happened and recovered.
It was unbelievable to watch in realtime and the folks at MarketDelta went back and overlaid squawk box audio from Traders Audio with a MarketDelta Footprint Chart to capture the event.
Warning: If you have high blood pressure do not watch!
Newton’s first law of physics states an object at rest stays at rest and an object in motion stays in motion unless acted upon by an unbalanced force. The same is often true for the markets, in whatever time frame you view them.
Market will drift in a direction until an opposite force (buyers or sellers) counters the direction of the drift. Footprint charts capture this force on screen in real time to create a better visual of market forces.
Most users who employ the MarketDelta Footprint chart are using it to track markets intra-day and intra-day markets exhibit periods of balance, rotation, breakout, and trend. There are many patterns to watch for, but if nothing else, the Footprint gives intrabar visibility to monitor what is taking place, keeping traders on top of the markets at all times.
A common pattern that occurs is shown in the screenshot of the ES from this morning. It shows a market that was balanced and rotating within a couple of points. All of a sudden near the bottom half of the range an “unbalanced force” in the form of buyers stepped in popped price higher.
The key thing to notice is:
the buyers aggressively stepped in near the low of the range and
almost all the trading was at the ask (offer) price. This is usually the result of a buy program being triggered and it is usually buy or sell programs that are the start of larger moves.
Today MarketDelta released a totally updated version of its popular MarketDelta Trader but this version has what version 1.0 should have had.
The ability to hide/expand the Footprint that is embedded in the DOM. This is really nice because if you are using MarketDelta Charts you can just collapse the Footprint in MarketDelta Trader and use the Footprint in Charts. However, for anyone with just Trader it provides a free Footprint chart and free data feed.
MarketDelta Trader now implements several of the TT (Trading Technologies Intl) patents because of license agreement the two companies just signed. This is fantastic because MarketDelta now has a static price ladder, drag and drop order, single click buys and single click sells. You can also “sweep” the order book to get in and out of trades.
A more thorough overview, upgrade instructions, and a video can be found on MD’s blog.
Here is an annotated screenshot MarketDelta posted to their support site that provides and overview.
The Footprint chart is a novel tool for studying market activity.
No other charting method offers the immediate transparency of the energies at work in the marketplace.
It demystifies the market’s order flow so you can quickly identify shifts in sentiment.
Here are some examples of common rotational patterns that occur every day in the financial markets. You can use the Footprint to confirm support and resistance levels or to monitor when the natural auction activity has exhausted in one direction and begins fresh in a new direction.
These examples are of the E-Mini S&P 500 Futures contract, but they apply to any auction market, including currency futures, other indexes, stocks or any financial instrument that trades in an open market.
One of the great benefits MarketDelta offers is all the unique data elements that can be leveraged in many different ways. Below shows a Footprint chart with custom data “labels” above each bar that show the delta value for the bar. This could also be done using bar, candlestick, point and figure, and renko charts. This employs the PRO version of MarketDelta Charts and uses signal markers for the label display and a custom indicator for the computation. It not as complicated as it sounds, so stick with me through the video.
A popular way to use a Footprint chart is for confirmation of support or resistance levels. Fibonacci retracements offer solid areas for support or resistance that markets will often test during pullbacks.
Below I have included a regular candlestick chart with the fibonacci retracement applied to the big down move in the ES yesterday afternoon. I took the high of the bar prior to the move and the low of the bar that ended the move. This is the most common way of apply fib retracements. The retracements are automatically drawn on the chart.
This next screenshot shows how to validate a potential reversal from this known 50% retracement level. This is the same fibonacci retracement, I just changed the chart from a candle chart to a bid ask Footprint chart and also changed it to a 4 tick range periodicity.
While this level may not always hold, it does provide a known target for traders and will often yield some sort of profit taking level for those who were fortunate enough to get long near the lows. Traders partially exiting or fully exiting a long will often put pressure on the market and cause a pause in the move up.
Because Footprint charts provide intra-bar information like volume and order flow, it makes it easy to see when profit taking begins to occur.
Besides just the longs exiting positions, the 50% retracement level can also serve as a spot for aggressive shorts to establish a position for a retest of the low or for just a good scalp.
The Footprint chart is an valuable tool for trading crude oil. Below is candle chart highlighting trading opportunities and then each opportunity is zoomed in on with a Footprint chart to better qualify the trade and manage the risk of entering and then managing the trade.
Most traders will find the Footprint most valuable when referring to support and resistance levels. These S/R levels could be from anything. Highs/Lows, pivots, fibs, value areas, high/low volume nodes, etc. Most traders know that when a market approaches support or resistance there are certain things to look for. The Footprint helps step inside the bar and see what is happening with volume, order flow, price.
Extracting better information out of the market at these key levels is what the Footprint excels at.
We will walk backward in time with the screenshots below. So the first screenshot is the most recent yellow circle on the chart. Each screenshot is annotated to show important insight on reading the Footprint information and associated indicators.
Pay special attention to the Footprint formations within the bars leading up to and leading out of the support and resistance tests.
Click here to download the chart definition of the chart used in these examples.
Welcome! Here you will find frequent examples from all the major financial markets, and learn to identify powerful patterns for your trading. If you are new to Footprint charts, check out the Basics category.