Tips on Using the Footprint Chart to Trade Spreads

Tips on Using the Footprint Chart to Trade Spreads

What is a Spread

For anyone not familiar with spreads, it is the process of buying one futures contract and selling another usually at the same time. Long one and short another. The idea is to profit from the differential between the two. Complex spreads can consist of more than 2 contracts. Here's a good write up from one of our broker partners about different spread strategies.

How to Plot On a Footprint Chart

Popular spreads are listed as a single symbol by the Exchanges and that is how we recommend viewing a spread on a Footprint chart. Just type the symbol and view the Footprint chart.  

To find spreads in MarketDelta, click More > Symbols Search and search the term "spread". You can filter by Exchange by clicking the box next to the exchanges.

Another way to trade spreads is to "leg" into it by separately buying the one futures contract and selling the other but this won't work for Footprints because there will be 2 sets of bid and 2 sets of offers because you are following 2 instruments.

Footprint Chart CL Spread Example

A very popular calendar spread that some of our prop firm trader customers trade is the Crude Oil calendar spread. Nymex crude oil has an contract for each month, so there are many combinations of this spread. A popular one is the current front month against the next month out. Currently that is September - October. So the October price is subtracted from the September Price. The symbol is CLES1.

Putting that symbol into MarketDelta will give a bid ask Footprint chart like this.

CL_Spread_U_-_V

Spreads don't have a lot volatility but it is still vital to understand how they are trading. The Footprint allows traders to "see inside the chart" and have an acute awareness of volume and order flow for the spread or legs of the spread.

Probably the biggest advantage the Footprint chart provides spreaders is the ability to see exactly how much volume is trading on the bid and offer and track it over time.

Another key benefit is the ability to see this order flow (on the bid or the offer) over time and tally up the delta for each price to see which side is "winning". In the screenshot below both prices (-0.70 and -0.71) had a negative delta, but -0.71 had a larger negative delta. This was reflecting the current battle very well and price proceeded to step lower.

CL_Spread_U_-_V delta profile
CL_Spread_U_-_V delta profile

The Footprint chart can really help you know which side of the spread you should be working and provide visual confirmation of why.

If there isn't an Exchanged traded spread symbol for the spread you trade, just chart the outright contacts symbols on individual Footprints to have a clue for which way it is leaning (see below). Try applying the Volume Profile Study on the right side of the chart to give you the big picture of order flow.

Footprint Chart Notes vs Bonds Spread Example

The screenshot below shows just one example of how you might track a spread using the individual legs. We recommend showing the delta per bar at the bottom and then the delta profile and/or delta per price. Watch for areas of absorption in one or both legs and use that information to your advantage.

In talking with spread traders, there are many ideas and ways they approach trading spreads. The Footprint is a great tool that will help understand the market in more detail, giving you a "leg up" on your competition. :)

TY vs US

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"Unfinished Auction" - New Feature

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Trade Example Using Intermarket Relationships and Footprint

Trade Example Using Intermarket Relationships and Footprint