Professional day traders have been using the footprint chart (FP) for almost a decade to earn consistent profits.
Therefore, if you want to increase your trade probabilities, this is a fantastic tool to implement to your tool belt.
When you look at the right information day trading becomes far easier.
Today I will introduce you to the footprint chart and show you how to use it to find high probability trade entries.
What is the FP Chart?
The chart is very unique and helpful for day trading.
First let’s talk about how it is created.
Once you understand how it works you will immediately appreciate its power.
How is the Footprint Chart calculated?
First of all, you need to understand that the chart is not time based.
Therefore it will not print new candles on arbitrary time passing, rather, it looks for market rotations.
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The chart is calculated by comparing volume trading on the bid to the ask.
It is like looking inside of a candle and volume, to see how the buyers and sellers battled to create the final candle.
On the left side you will find the number of contracts traded on the bid.
Similarly, on the right side you will find the number of contracts traded on the ask, or the offer.
Here is a visual representation.
You will see the prices of the SP500 futures (ES) on the right axis.
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Each candle has the total volume traded on the bid on the left, followed by total volume traded on the ask (offer).
The “x” symbol is just a separator.
Finding Market Reversals
Now that you understand what the chart is and how it is calculated it’s time to talk about how to apply it to your day trading.
One of the most powerful aspects is the comparison between bid and offer volume traded.
What would it mean if at a price level of 2,764.00 a whole 1,000 contracts traded on the bid?
This means that 1,000 sellers hit the bid, a sign of aggressive selling.
Now imagine at one level below, 2,763.75 there were only 10 traded on the offer.
This would imply that 1,000 contracts were sold at market above. At the same time, only 10 were bought above this price.
In order flow trading, this is called a “sell imbalance”, and it appears as a red number on the chart.
Therefore, you would expect to see a wave of selling if that offer level holds – which could lead to a market reversal.
Let’s see a concrete example. In the chart below you will see a chart rally on the SP500 futures (ES contract).
Buyer Exhaustion Leads to Sharp Sell-Off (Market Reversal)
In the footprint chart below you can see a strong rally from the 2,757 level.
As the trend extended higher, you see only green numbers on the chart. This is a sign of strong buy imbalances and big money going long.
Once the market approached the 2,763.25 level near the top, you can start to sell strong sell imbalances appear.
In the first instance, you see 368 contracts were sold at market at 2,763.25. One level above, only 19 were bought. A very strong sell imbalance is formed.
A few candles later, you see another massive sell imbalance on the chart.
This is your timing for a short entry to capture the market reversal, with a stop loss above the high of the move.
But what happened next? Do you think this trade would have worked?
Here are the next few candles on the chart following the sell imbalances.
You can see that these sell imbalances on the footprint chart offered a great 2 point day trading fade opportunity.
These setups are consistent and very low risk, high reward throughout the day.
Now let’s talk about how to use the FP chart for trade entries.
Finding Trade Entries
It is very important for you to realize that this is only one tool in an overall strategy.
When you utilize it alongside other order flow and traditional technical analysis it becomes much more powerful.
Hence, as a day trader, you can sell below sell imbalances on the chart.
Alternatively, you can look to buy above buy imbalances (green FP chart levels) for high probability trades.
But adding in other tools for confirmation will greatly improve your day trading results.
Now you have access to one of the most powerful day trading tools.
The next step is to learn how to qualify high probability trades by combining this chart type with other powerful order flow tools.
If you want to learn more about order flow trading, our day trader pro subscription is the perfect start, click here to learn more.
Finally, you can watch other professional traders apply this analysis in real time on live markets in our live daily trading room.
It is included in your subscription free of charge.
This is what we call the TRADEPRO edge.
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That’s it for today, I hope to see you in our live trading room tomorrow.
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The information contained in this post is solely for educational purposes and does not constitute investment advice. The risk of trading in securities markets can be substantial. You should carefully consider if engaging in such activity is suitable for your own financial situation. TRADEPRO Academy is not responsible for any liabilities arising as a result of your market involvement or individual trade activities.