How To Manage Your Trade Using Footprint Introduction

In this blog post, we will discuss how to manage your trade using Footprint. The Footprint is a powerful tool and can show us what actually happened between buyers and sellers. Given the speed of the markets, this is a great tool to understand what buyers and sellers think about the current price as demonstrated by their actions. We will review a Delta reversal clue in EMINI S&P500 and what followed afterward. We will discuss the absorption and one-time-framing in Oil after the initiative action. All of these clues can improve your data-driven judgement about what might happen next. If you are interested in other Footprint strategies, visit our previous post about Footprint execution. Now, let’s review the detail of the two trades we have introduced.

Footprint Trade Management In EMINI S&P500

This trade happened to be in the EMINI S&P500. The general idea is to play the key auction reversal at the important inflection point.  As we are approaching this inflection point, we see volume increase and sellers hitting the bid. Then comes the first sign of buyers lifting the offer but still lacking aggression. You can tell the buyer’s presence by the Footprint changing to pale blue. This now becomes an important time to watch since buyers are slowly stepping in (see here).

Let’s review what we are seeing down below. We see expansion in volume, volatility, and negative delta. If taken in isolation, this can be a sign of either market starting a new trend or a mark of the market making a new swing low. Mark of a possible reversal. Now, it is very important what happens next. Next, we can see aggressive buying, and the market leaving a Delta reversal clue.

Given our idea for key auction reversal, given the location, this comes at a point where we expect the market to provide us with such a clue. Great! Now it is all about the ability of sellers to show their initiative and buyers’ ability to absorb and lift the offer.

As we can see, no large initiative selling stepped in after the Delta reversal. We can see a pale blue on the Footprint most of the time. This is a sign that buyers are in control and sellers given their strong initiative earlier might not have the strength to push the market further down.

Given the location of 4188 (dark blue), that is our line in a sand (LIS). Sellers had one last attempt to test our location, the point where buyers initially stepped in. You can see above that selling pressure increased into our LIS but were unable to achieve anything, no follow through down. Now, the trade is on, now is the time to hold onto your trade since you have done the hard work.

Footprint Trade Management In Oil

In this case, we are looking at the chart of Oil. After we have initiated our long, the natural tendency of the market is to find some responsive selling. The moment it does, we need to understand what type of rotations are expected. What is a “healthy” rotation and what is a “warning” rotation.

Looking above, we have done a very nice volume of 8780 contracts traded to the upside. Healthy rotation back should be smaller in terms of volume and range size. And it is, the next bar traded 4468 contracts followed by 2719 contracts.

As you can see from the footprint, we could also expect some absorption at the lower part of the rotation. In this case, visually bars turned red signaling selling pressure that got absorbed. This selling pressure is also clear from the negative delta. We have a negative delta but a healthy rotation. Good sign!

As we started to move slowly higher, the next bar was unable to put lower low. This gave confidence to this trader that we might start one-time-framing higher and upside momentum will get back and push our trade to the desired target.

If you want to learn how Axia Traders trade other Footprint patterns, visit the free workshop we are running at: https://go.elitetraderworkshop.com/Free

If you liked this type of content, you might check these videos as well:

• How to Start Using Footprint Charts | Axia Futures
• How To Become A Better Trader | Axia Futures
• What Really Good Footprint Action Looks Like | Axia Futures

If you like our content and would like to improve your game, definitely check one of our courses that teach you all the techniques presented by AXIA traders from a market profile, footprint, or order-flow. If you are someone who likes to trade the news, we have a great central bank course. And if you are really serious about your future trading career, consider taking AXIA’s 6-Week Intensive High-Performance Trading Course.

Thanks for reading and until next time, trade well.

JK

How Can Footprint Improve Your Trade Execution Introduction

In this blog post, we will learn how can Footprint improve your trade execution. If you have watched a price ladder for a while, you can get a feel for the personality of the market. Given the number of data points trader needs to digest in real-time, Footprint is a great tool that can help you to zoom out. By zooming out, you can still observe the order-flow and not get drawn into every bid x offer change. That’s why a Footprint is a great tool that can make you less emotional and a little bit more objective by making a more visually appealing rule-based system. If you want to expand your understanding of the Footprint even more, don’t forget to read our previous article about Three Trading Techniques Using Footprint.

Using Footprint To Trade Around Iceberg

There are many ways how we can access our trades. Sometimes standalone patterns and market setups can provide us the access we need to unlock our desired trade.

In this case, an iceberg spotted on the Footprint created an opportunity in two ways. First, it created a poor high that needed reauctioning, and second, the liquidation out of the iceberg gave us the chance to enter a long trade. The moment the volume dried up after the liquidation, that was our chance to get into the trade.

What you see below is a Footprint chart of the EMINI S&P500. Starting from the top left red circle, you can see the color blue significantly highlighted in comparison to other candles. That is the Footprint chart setting for buyers aggressively trading into the offer, something what we call absorption.

From the Footprint chart is apparent, that the significant blue was an iceberg that held the prices and created an interim top. The market offered deeply giving us an attractive ceiling to attack when the market refills the energy.

After the selling settled, buyers stepped back in providing us with delta reversal (third rectangle from the left). Delta reversal is characterized as two intervals next to each other (in our case a span of two/three candles) where one had a high negative delta and the next interval (candle) had a stronger positive delta, signaling a change in auction personality.

As we were approaching the original iceberg, we paused exactly at the same blue location as previously. Iceberg still unfinished. A fast liquidation of longs, that were trapped hoping for an iceberg to break got washed with no real selling obvious from the Footprint chart. This was your chance to enter a trade with a good location and nice RR.

So insights a Footprint could give you?

• visually clear areas where iceberg occurred (blue color)
• delta reversal signaling bottoming (negative x positive delta change)
• fast liquidation signaling liquidation rather than true reversal (no big sellers appeared)

Using Footprint To Trade Low Volume Node

“As long as buyers are in control, our trade is on”. But what does it mean for buyers to be in control? One way to exploit who is in control is to use a Footprint chart.

In the video down below, trader Isaac breaks down his ability to read the Footprint to decide, whether to stay in the trade or not. He relies explicitly on the low volume node formed at the specific location on the chart.

In the image below, we are looking at the chart of EMINI S&P500. Market is positioned to possibly open with an open drive and we are looking for Footprint clues right at the open.

The yellow circle highlights the break at the open where the market left a low volume area. As long as the market does not return to this area, this is a good signal for us to hold our long trade.

The market also placed a large volume of buy orders just above the low volume area as highlighted in blue. Another tell that buyers are aggressive and want to further lift the market. As long as the market holds above the low volume area, there is a chance for a market to keep lifting the offers.

The market provided us with fast liquidation and again, no big sellers appeared. Time for us to get long with very good RR, stop below the low volume area, and target based on the bigger picture structure.

Using Footprint To Trade Less Emotionally

Last but not least, trader Isaac shares with us a good lesson about the price ladder. On one hand price ladder gives us huge benefit in the understanding of the dynamic between buyers and sellers. On the other hand price ladder can make us more reactive and less objective.

Trader Isaac tried a different approach for a change. Instead of focusing only on the price ladder, he has focused on the Footprint when entering the trade. By doing that, he was able to lower the intensity of absorbing every bid and offer change and this practice made him less vulnerable during the initial phase of the trade. Learn what trade he took and how he was able to use the footprint to execute the trade by watching the video above.

If you want to learn how Axia Traders trade other Footprint patterns, visit the free workshop we are running at: https://go.elitetraderworkshop.com/Free

If you liked this type of content, you might check these videos as well:

• How to Start Using Footprint Charts | Axia Futures
• How To Become A Better Trader | Axia Futures
• What Really Good Footprint Action Looks Like | Axia Futures

If you like our content and would like to improve your game, definitely check one of our courses that teach you all the techniques presented by AXIA traders from a market profile, footprint, or order-flow. If you are someone who likes to trade the news, we have a great central bank course. And if you are really serious about your future trading career, consider taking AXIA’s 6-Week Intensive High-Performance Trading Course.

Thanks for reading and until next time, trade well.

JK

Three Trading Techniques Using Footprint Introduction

In this blog post, we will explore three trading techniques using footprint. We will break down two types of trades, one in EMINI S&P500 and another one in NASDAQ. We will use Footprint chart to visually identify pivot points that helped our Junior trader Alex to access and manage both trades. We will also reference the previous article, where we discussed the JUMP trade technique which Alex used for his access to the NASDAQ trade.

Trading The Reference Block Using The Footprint

This trade happened to be in the EMINI S&P500. The general idea is to play the key auction reversal at the important inflection point.  As we are approaching this inflection point, we see volume increase and sellers hitting the bid. Then comes the first sign of buyers lifting the offer but still lacking aggression. You can tell the buyer’s presence by the Footprint changing to pale blue. This now becomes an important time to watch since buyers are slowly stepping in (see here).

As we watch the orderflow, we can see for the first time real aggression from buyers stepping in. Observe how at 97 and 98.50 73 lots and 40 lots starts to lift the offer with other orders following. Again, watch the footprint as the patch of blue appears. We now have a confirmation that buyers are truly interested in this reference block. It gives us a first chance to get long.

So how can we use the footprint to our advantage? First, we can spot that our reference area is getting confirmed by the interest from buyers. Remember that patch of blue that got darker? That is a signal that visually highlights much stronger interest than on previous prices. First clue.

The second clue is how suddenly that reference block gets defended on the retest by the buyers . And last but not least, there is no selling pressure stepping in on the retest.

These three clues give you a chance to place a high risk-reward trade because the location has become important for buyers to defend.

Trading Low Volume Nodes Using The Footprint

This trade happened in the NASDAQ. Here, the trader has waited for a while and must have been patient for good absorption to happen first. Jumping early would cost him both confidence and monetary capital. As the absorption progressed it has become clear, by observing the footprint that sellers are losing their strength. Again, visually obvious from the pale red color. 

Ready to get long, this trader understands the NASDAQ’s nature. Thanks to its thin nature, larger rotations are expected but the underlying expectation is this: the moment market crosses the marked line 12314, the resting stop market order will get hit. What is expected is the JUMP type of trade after the resting stop market order is triggered.

As the market hits the order, it fluctuates for a moment and jumps after two short rotations. That is your first Footprint signal. The JUMP produces a low-volume node.

Now we want to see the auction aggressively lift offer, auction larger patches of orders creating a high volume node and leave another low-volume node behind.

Following footprint, you were given three clues. Drying up of the sellers before the JUMP. The JUMP clue leaves low volume nodes behind and highlighted blocks (high volume nodes) after the low volume node.

If you want to learn how Axia Traders trade other Footprint patterns, visit the free workshop we are running at: https://go.elitetraderworkshop.com/Free

If you liked this type of content, you might check these videos as well:

• AXIA Junior Funded Trader Remains Composed After Missing Vaccine comment Live Trading
• AXIA Elite Trader trades Gilts & GBP On Bank of England Rate Decision
• AXIA Elite Trader Attacks 4 Markets On July 19 FOMC Rate Decision And Presser

If you like our content and would like to improve your game, definitely check one of our courses that teach you all the techniques presented by AXIA traders from a market profile, footprint, or order-flow. If you are someone who likes to trade the news, we have a great central bank course. And if you are really serious about your future trading career, consider taking AXIA’s 6-Week Intensive High-Performance Trading Course.

Thanks for reading and until next time, trade well.

JK

3 Steps To Trade Fundamental News Introduction

In this blog post, we will break down 3 steps to trade fundamental news. When dealing with the news, we need to be aware of the current narrative. Because narrative sets the expectations for the market, anything outside of that narrative acts as a surprise. So the fundamental narrative gives us the scope of where we are and where we can go if a change of that narrative occurs. Going further down the rabbit hole, we will break down the importance of positioning, price response, and the market’s ability to trend. A great example of the change of that narrative was the recent ECB’s hawkish pivot that our Elite Traders were able to profit from greatly.

This article is based on the video below.

3 Steps To Trade Fundamental News

As soon as we understand the narrative, we can start to model scenarios that would change the narrative. This is where fundamental news trading starts. There are other forms of news trading, but today we are focusing on the change in the consensus, the change in the narrative. Additionally, we can add a sentiment as well. That is how the market perceives the current environment: risk-off or risk-on.

Now let’s break down three important elements that we can add to our equation.

Positioning

What is the current positioning? Whether it is the positioning leading to the expected event or just the current positioning, we are looking into two things. In the short term (weeks and days) we want to know:

• what is the market structure?
  • Who is the dominant player in that structure – buyers or sellers?
• how strong that structure is?
  • Where are weak and vulnerable spots in the structure?

A great recent example was the positioning into the Jerome Powell’s speech at the Wall Street Journal event. On the day of the event, we bid strongly, leaving the poorly auctioned structure below. The result of that event was no change in the narrative. Given the current narrative and sentiment, this poor bid got unwinded with the close very quickly, when during the non-RTH open market tried to break higher and failed. Here is the look:

Price response

When we face the news, our immediate questions should be: does the price action supports our view with ease or difficulty? We want to see the initiative confirming our conviction. If it is a change in the narrative that has not been priced in, we should see a response. This can be added into reason2exit as an exit criterion if the price action simply does the opposite. If the market simply doesn’t care, don’t assume, that you are early or the first one to pick this up. But if a slight pick-up in the activity is clear, even if it is not all directional at first, the market starts to absorb the information. So in general, the rule of thumb is this: the price action should confirm the change in narrative. This leads us to the last step, the response.

Ability To Trend

The ability to trend is about how much liquidity is being provided in the opposite trade. The less liquidity the better because our move will have a cleaner move. The market’s ability to trend without deeper pullback is a good sign, that we are on the right side of the trade. Remember:

“The bigger the news the shallower the pullback”

Trade Example

Oil

Now here is the question for you. What is the positioning prior to the upside break (prior to a break above the yellow line)? Look at the image above and below and try to identify:

• positioning
• price response
• ability to trend

First, think about these two images. Then watch the video that is part of this article.

Elite Trader News Trades

In case you want to learn from the Elite Trader execution about the concepts we have just described, watch this real-time price action, and also reading the How To Execute Like AXIA’s Elite Trader would be valuable. There are a lot of examples of narrative building, positioning, and confirming price action. Learn from these articles.

If you want to learn how professional traders trade the markets in greater detail, don’t forget to check the free webinar we are running at: https://www.elitetraderworkshop.com.

If you liked this type of content, you might check these videos as well:

• AXIA Junior Funded Trader Remains Composed After Missing Vaccine comment Live Trading
• AXIA Elite Trader trades Gilts & GBP On Bank of England Rate Decision
• AXIA Elite Trader Attacks 4 Markets On July 19 FOMC Rate Decision And Presser

In case you are interested in finding out more about trader training to learn how to trade and explore other great trading strategies, check out our futures trading course that teaches you exactly that and more. Or if you want to really maximize your ladder execution, check out our price ladder trading course.

Thanks for reading and until next time, trade well.

JK

Two Breakout Strategies For Futures Markets Introduction

In this article, we will review two breakout strategies for futures markets. We will have a look at the breakout that worked, and the breakout that failed and was cut and reversed. For our analysis, we will use footprint in one instance and price ladder in the other. Both of these tools derive value from the orderflow and that is what we are going to focus on today. We will review several key highlights of the orderflow that can help you stay in the right direction and reverse the position quickly when participation changes. If you like these concepts, don’t forget to review our previous article on How To Trade a Failed Break Pattern.

Two Breakout Strategies

Breakout Strategy With Follow Through

If we were to analyze the break explained in the video above, we would focus on highlighting two aspects that trader Bran has mentioned:

1. The best breakouts come when markets consolidate ahead of the break
2. When we see a lack of initiative at the low prices, it is a signal that break won’t have follow-through until it does

What do we mean by these two points? Point number one is about seeing consolidation prior to a break. The longer the consolidation, the more energy has been concentrated in the range and this should help the expansion of the range when the range breaks.

Point number two is about seeing the initiative with the break. We want to see THE CHANGE at the location, that lacked initiative in prior instances that failed to break.

Strategy That Failed To Have Follow Through

In the second instance, we are actually witnessing how the follow-through fails. Trader Joe is explaining well one crucial aspect in which he is willing to hold the trade while being down a couple of ticks:

• when you see churning and absorption happening at the bid, you are constantly thinking, this must go any time soon and then you see how those bids got pulled, that is your time to exit and cut and reverse because you are left with vulnerable position

Down below is a price ladder showing you a trader that is still long, but cutting and reversing his position quickly. That reversal is key because now the market needs to go fast down so you can manage your risk accordingly when you flipped your position. And it does, it collapses 20 more ticks to the downside. Here is the cut and reverse part of the video that is very interesting.

Key Trading Takeaways

There are several aspects one must consider when one anticipates the follow-through or a breakout such as general market rhythm, the quality of location, the maturity of the location, and the quality of the participation. When participation changes, that is the time for the change. Something to be aware of going into your future breakouts.

If you want to learn how we trade the markets in detail, don’t forget to check the free webinar we are running at: https://www.elitetraderworkshop.com.

If you liked this type of content, you might check these videos as well:

• Trading the V Reversal Price Action in the Dax | Axia Futures
• Reversal Entry Trade In The S&P | Axia Futures
• How To Trade The Delta Reversal Strategy [FOOTPRINT CHART]

In case you are interested in finding out more about trader training to learn how to trade and explore other great trading strategies, check out our futures trading course that teaches you exactly that and more. Or if you want to really maximize your ladder execution, check out our price ladder trading course.

Thanks for reading and until next time, trade well.

JK

Footprint Strategies You Can Apply In Your Trading Introduction

In this article, we will discuss different footprint strategies you can apply in your trading. Specifically, we will bring the comparison of the footprint to the market profile, discuss the effect of the footprint in a thick rangebound market and explain different ways how footprint color coding can help your own trading style. We will introduce three footprint trading strategies and explain in what ways you can extract clues from the micro-structures of the market. For those of you that are not familiar with a footprint, definitely check one of our workshops that have been made public (part 1 and part 2) on the topic of footprint. If you are serious to step up your footprint trading game, don’t forget to check our course as well. Ok, let’s get to it.

This article is based on the video down below.

Footprint Strategies

Introduction

This article expects some level of understanding of how to read a footprint chart. If you are new to footprint, I recommend you to follow the links from the introduction of the post. For those that are a bit familiar with a footprint, a short recap.

Footprint represents a view into a bid x ask interaction for each price. For every price, buyers and sellers transact with each other. The function of a footprint is to give you an insight into how much volume has been transacted at the side of the buyer and on the side of the seller. Understanding the footprint dynamics can give you an edge into when to act and when not to act at the micro-level. This is crucial for precision entries and optimizing your stop-placement.

Now let’s have a look at three different footprint strategies you can use in your own trading.

Strategy 1: Micro Double Distribution Footprint Strategy

Since markets are fractals, footprint property is the same one as the property of volume profile but just at the lower scale with more detailed insight. What do we mean by that? Imagine a strong move up (see picture below). As the move goes up, some short-term shorts are forced to liquidate. In the volume profile terminology, a P shape is created. The same applies to the footprint, just at the lower scale. Now, given other tools like price ladder and general market profile landscape, you can monitor where the footprint starts to absorb volume into the top of the P shape and place its stop below the edge (assuming you are getting long, you want to get as close as possible to low volume node, the bottom of the bulked volume at the top of P).

Now, looking at the footprint, the market basically created a double distribution move on a smaller scale and you can use the understanding of where the volume is forming in real-time to manage your risk and place your trade.

Down below is an example of what we have just described. The green arrow is the low of the bottom of the P shape. The main volume has been built above the green arrow. That is where the value has been accepted. That is the spot where you want to start thinking about executing the long trade.

Strategy 2: Micro Range-Bound Footprint Strategy

Here is another look at the footprint chart. In this case, we are looking at Bonds. Bonds in general are thicker markets. A lot of volume is exchanged between buyers and sellers therefore they tend to move less than other thinner markets like Gold. This is important. This dictates how volatile the actual market is. If we are aware of this, we can use that information in our favor. Any point of reversal can be our signal to start observing the footprint and watch for the volumes being exchanged. When we spot that one price is exchanging very large volume and the other has no interest to exchange much of a size, this can be our trigger signal, that directionally that size is weaker and use it to our advantage.

Let’s have a look at what I mean using the image below. Here you have a footprint of how much has transacted between bid and offer, 3340 x 2477. Now, look at how much volume has transacted one price above: 0 x 129. Do you see that comparison? Buyers had almost no interest in lifting the offer with just 129 contracts trying to lift the offer. Given the other clues, this can be your access signal to get short with a tight stop.

Down below is the overall view of a candlestick chart (left) and footprint chart (right). We can see, that our bear zone (pink zone on the left side of the image) had a nice confluence with our access signal that we have explained above.

The same can be applied for a long reversal. Ideally, you want to see a confluence of other clues coming together. In this case, 11.1k x 11k contracts transacted (see image below) at the low of the range. What happened at the next price lower? Only 859 contracts hit the bid in 0 x 859 display. Taking into consideration that just one price above 11x more contracts have transacted (11k vs 859), using the price ladder pace (not included), we could have seen a personality shift in action. This shift could have given you the confidence to initiate the trade and ride the wave of the unwind of all the sellers that got short near the bottom of the distribution. If you are not familiar with the price ladder lingo such as “personality shift” and “change of pace”, check our course where we teach you how to read the price ladder. Or join our free webinar to get a taste of what our 7 figure traders are using.

Sign up for the FREE Live Training below and get ready to take that next step right now: https://go.elitetraderworkshop.com/Free

Strategy 3: Footprint Color Coding That Helps Initiate A Trade

Although this is not necessarily a strategy on its own, using color coding/color highlighting can be very beneficial. Why? If you can make the volume delta stand out, your eyes can pick up the change much easier and give you extra confidence that this is the spot, where things are changing. Seeing this action can give you extra precision in your stop placement. In the image below, you can see, how after the larger drop on a tighter volume (pale gray and pink colors), green and red appeared highlighting increased volume delta with green color representing buyers being aggressive and red color representing sellers being aggressive. This aggression stood out much more than in all other previous prices in this instance aka rotation. In general, the multiple red-colored boxes after a large move down represent an absorption. Buyers were willing to passively absorb the aggressiveness of sellers. An ideal time for reversal when other clues aligned. What happened next is clear from the chart. This could have been one of many clue, to get long.

That is all for now. There is one important takeaway: footprint can give you precision in your access and stop placement. As always it is about combining the right tools together to gain the biggest possible advantage in the market.

If you liked this type of content, you might check these videos as well:

• Footprint Trading Workshop – How To Setup, Interpret & Comprehend | Axia Futures
• Footprint Trading Workshop – Market Interaction & Scenario Analysis | Axia Futures
• How To Read The Footprint Chart – Advanced Trading Tutorial | Axia Futures

In case you are interested in finding out more about trader training to learn how to trade and explore other great trading strategies, check out our futures trading course that teaches you exactly that and more. Or if you want to really maximize your ladder execution, check out our price ladder trading course.

Thanks for reading and until next time, trade well.

JK

In a previous article, we had briefly discussed the importance of understanding what data to draw the market and how to intuitively organize it for edge. This part served as a prelude to clarify the correct mentality needed to understand and learn how to use the footprint, but this in essence this exemplifies all of trading itself. I felt that this part warranted deeper investigation, both as a concept but also a useful opportunity to use the footprint as an example within this framework.

To reintroduce this concept, we can begin with an example where it is most apparent. From observing other new traders and remembering my own previous naive ‘rationalizations’ the issue centers around having no intuition, deep thinking or simple questioning of the trading tools that are being used. Expectations of obtaining edge are centered around just using the tool in and of itself. In other words, expectations are incorrectly set in that the scalpel is what makes a successful surgeon by merit of him picking up the tool, rather than understanding what it is used for and having the skill to use it.

As such, the wrong expectation creates the incorrect approach in learning how to use these tools. “By picking up this tool I have edge”. Using this logic the trader is doomed to frame his trading and learning through ‘Idea about Markets > Trading Tool > Observation > Edge’, where the trading tool organizes market data in a specific way for it then to be observed and traded as ‘assumed’ edge. The focal point of this mistake is that the trader first has an idea or theory about the markets first, and then looks for tools to filter this data within it. “Footprint charts help with order flow trading, where I think there is edge, so I will use footprint charts to show me the edge”.

Deductive Reasoning and (Un)Certainty

Let us go further. We have in effect stumbled upon deductive reasoning. This reasoning begins with an idea or theory first in which all following observations and conclusions are filtered through under this ‘idea umbrella’. To borrow from a common textbook example – “All men are mortal. Harry is a man. Therefore, Harry is a mortal”. Deductive reasoning is the cornerstone of much of the world – the sciences, research, academia, and games like Chess which feature complete and transparent information. For these domains, the fixed and ‘true’ information is of great use since the conclusions are absolute and therefore are used to predict an outcome of ‘virtual’ certainty – a binary conclusion.

Certainty is not a word that survives the trading domain. Shifting probabilities, incomplete information, and emergent behavior make this a qualitative business. Decision making and reasoning under probability and opaque information must be aligned with the type of domain you are operating in. To borrow from complexity theory and the Cynefin framework, as traders we deal with the ‘complex’ domain not the ‘complicated’ domain. The ‘complicated’ domain is computable, binary (right and wrong) and linear. The ‘Complex’ domain is non-linear, emergent and ‘temporarily resolvable’ with trial and error but never ‘solved’. As intra-day discretionary flow traders, we intuitively discover this along the way but not without incurring large costs of time and capital. Perhaps due to the rigidity in the schooling system, many jobs and academia are steeped in static and ‘complicated’ domains which creates a default deductive thinking mentality to approach all issues. Therefore, the inability to shift away from deductive thinking when working on a ‘complex’ domain is what creates a high failure rate.

Ants and Aerial Combat – The Complexity Domain

Conversely, inductive reasoning is appropriate for dealing with a ‘complex’ domain – that of trading. This reasoning begins with pure observation first and the subsequent patterns that are observed create a hypothesis and later theory into why something occurs. In other words, the trader would be observing markets and data by simple observation, with no pre-established ‘lens’ as he would with deductive reasoning. Due to this, inductive reasoning has a wider range of conclusions or outcomes and is open ended by nature. There is no binary outcome, rather a likely conclusion that has been ranked higher by probability than other outcomes. This bottom up, constant re-evaluation of one’s observation is what provides adaptability which is vital when operating in the ‘complex’ domain. ‘Complex’ domains almost always feature ‘emergent behavior’. Simply put, the behavior of one component in a system cannot reliably predict or model the activity of the system as a whole. In other words, modelling the behavior or understanding the properties of a single ant cannot predict or model the behavior of an entire ant colony. A singular ant is simple but once part of a colony a different behavior emerges. Moreover, changes to the ant colony’s environment would usually result in new emergent behavior which cannot be reliably modelled or anticipated in advance.

Dealing with emergent behavior or an environment that constantly ‘changes the rules of the game’ is not only an issue concerning traders and markets, but anyone involved in the complex domain like in war and conflict. To paraphrase Nassim Taleb, one should only listen to the advice and practices of those with skin in the game. Whose practices would be better to study than those whose risk their own life during wartime? A deliberate practice of this would be the ‘OODA Loop’ developed by Colonel John Boyd and implemented by the US Air Force during the Cold War. This was an approach to help a human deal with the ‘complex domain’ under stress during aerial combat in the new jet-fighter era that required split second decision making. It being an inductive approach – the fighter pilot would be in constant ‘observation’ mode and would constantly weigh new information probabilistically to understand the developing patterns that are emerging from enemy movement in order to best deal with it and win.

This meaningful shift in thinking from deductive to inductive is key in effectively learning and using the trading tools you have at hand. Essentially, the explanation above is a fleshed-out version of what was emphasized in our previous footprint article – ‘To build a useful footprint chart you must have: Observation > Idea > Footprint build > Edge’. This process is inductive reasoning adapted to our needs and differs from the deductive mentality of – ‘Idea about Markets > Trading Tool > Observation > Edge’. This difference might seem insignificant at first but if a trader were to engage in deliberate re-framing of his debriefing and learning process to think inductively it would not take long to appreciate the difference. Let us illustrate this in the context of a footprint trade.

Footprint Charts, Inductive Thinking & You

One frequent ‘setup’ that seems to trap a lot of traders into the inductive vs deductive issue as described earlier is the concept of ‘finished and unfished auctions’ via the footprint charts to either enter or manage trades. To summarize this concept, we can use the market auction framework. Market participants will keep transacting (volume) at escalating prices until they become too expensive (away from value). Volume will usually taper off until the high where buyers lift the offer into a price but never sweep the price and never stack the bid at that price. This leaves such a pattern on the footprint at point A:

Here the market bid all the way until only 25 lots lifted the offer at the high, but the buyers never swept the price to lift the next price, leaving (0x25) on the footprint. Likewise, an ‘unfinished auction’ can be seen at point B where both the bid and offer were hit at that price (76×225) once the buyers swept the price and then stacked the bid at that price.  

The ‘standard’ trade setup that uses the footprint in this way usually concludes that ‘finished auctions’ are usually featured at the high or low of a move and that ‘unfinished auctions’ usually are re-traded through until another ‘finished auction’ pattern is displayed.

It is at this juncture where the outcomes of inductive vs deductive approaches become apparent. The deductive new trader approach will usually understand this by default as ‘Idea about Markets > Trading Tool > Observation > Edge’. He has learnt (heard) that finished auctions are seen at reversals, and therefore using the footprint he will watch his screens until a finished auction is spotted and trade it every time he sees it. From here his thinking is constrained linearly (A=B, but B = C, so A=C). The existence of this finished auction at an apparent reversal point on his screen confirms the initial idea that finished auctions are always the high of a reversal and therefore there is must be edge in trading this. In effect, this information is being taken at face value, where the trader will be rewarded randomly at best or come away at an overall loss at worst. Lastly, due to the outcome (failed trades) being lackluster the deductive mentality will conclude that the reverse must be true. “I had a negative outcome (no edge), so the observation (finished auctions at reversals) must be wrong, and the trading tool (footprint) doesn’t work, so this idea about markets is also incorrect”.

Let us now consider the inductive approach to the same situation. Recall that we have adapted this as ‘Observation > Idea > Footprint build > Edge’. To continue the same example, these finished and unfinished auctions are generally observable with a price ladder and nothing else. This natural price action is likely to be picked up by a new user after some screen time in some form or another. Naturally, the trader would then further develop these observations to see that the fight for price between long and short participants becomes more uncontested as prices trade higher, ultimately resulting in lower volumes with one last buyer trying to lift a higher price but progressing no further. Initiative sellers step in and take prices lower instantly. This price action is what can be summarized as a finished auction and creates the market high and subsequent reversal. This trader (through more observation) would realize that the probability for this chain of events to create a ‘reliable’ (high probability) reversal are skewed higher in certain market conditions and prices (levels) or areas.

In effect, the trader has piecemealed different market information and observations from the bottom up to then create an idea about what is currently happening. Critically, the trader has arrived at this conclusion (market reversal) through observing a chain of events with no pre-conceived idea or ‘lens’. Like John Boyd’s’ fighter pilots, this bottom up, constant re-evaluation of one’s observation is what provides adaptability which is vital when operating in the ‘complex’ domain.

Due to the trader understanding about what is likely (but not is certainly) going on he can use his trading tools to effectively summarize these observations (finished auction on the footprint). There is weight, depth, and intuition of the pattern he is seeing, he is not taking this pattern at face value like the deductively default trader. Further, the idea of the ‘footprint build’ is deliberate. The trader notices these finished auction events are happening frequently and therefore he can build a tool around this idea, and then decides that a footprint chart would be of best use to him to aid in observation consistency and speed – especially in volatile and fast conditions. Conclusively, the trader has built a tool for his purposes to help his observations and decision making which is the edge. This contrasts with our deductive default trader that would sit at his screens and just pick out ‘random’ finished auctions and walk away disillusioned at the futility of it all.

Ultimately, this footprint setup, or even the tool itself is only an example that can be interchanged with in any other since we are dealing with a general principle – and is the main takeaway of this article. For the correct usage of trading tools and general learning there must be weight and depth behind what you are observing. Place deliberate emphasis on inductive questioning and observation in your trading domain to ensure adaptability to the current market environment. Constantly prune through your trading plans and debrief approaches to make sure there is no ‘face-value’ and shallow deductive-like assumptions that likely create blind spots in your own process.

Good trading to you all,

Bogdan

Axia Futures
4 Endsleigh Street London GB WC1H 0DS
+44 20 3880 8500
https://axiafutures.com/

Social Media:
Facebook: https://www.facebook.com/AXIAFutures/
YouTube: https://www.youtube.com/AxiaFutures
LinkedIn: https://www.linkedin.com/company/Axia-Futures/

Contacts:
Demetris Mavrommatis – Co-Founder, Head of Trading
Alex Haywood – Co-Founder Head of Strategy

Specifically, we will look at:

• Bull flag – what clues to look for, when a flag is formed and how we should wait for appropriate timing to access the trade
• Footprint – what to look at the footprint chart in order to define meaningful risk-reward trade

We will use a breakout trade in Gold as demonstrated in the video down below in our example.

Bull Flag Technical Pattern

Starting with the bull flag technical pattern, we will first look at the basic principle that defines a bull flag. Let’s use this picture to describe the very basic parts forming a bull flag.

In other words, we have an initiative, in this case by buyers. Once the liquidity was found, we have a two-way trade followed by a change in dynamics and initiative taken again by the buyers. One of the ways, how you can read the nuances of the flag is to use the market profile as we have discussed in our previous post. You can also take different approach just by simply analyzing how each candle was formed and how long it took buyers and sellers to move prices.

Let’s have a look at our gold example:

As you can see buyers moved prices much more quickly then sellers did. This can be one of the clues, that this flag has the potential to break and continue higher. Let’s define our clue:

Does that mean, that we should buy immediately because buyers are stronger than sellers in this particular instance? No, but it gives us a clue to build our narrative. One of the risks you are running with flags is “Harry the hindsight”. It is a very easy post flag break to say, where you “could” buy and make money. The problem is that, when a flag is forming, you need to wait for that exact point to define your risk and not getting in too early (pre-empting) with very hardly defined risk. In order for us to define a risk well, let’s use footprint, to look inside the breakout out of this flag to understand, how we could access this with well-defined risk.

Using Footprint Chart Patterns To Access The Trade

What we are specifically looking at with the breakout out of this flag is a way how to access the trade. We can notice how volume and range changed at 7:25PM relative to recent volume with 2000 contracts traded lifting the offers (marked as A on the image down below). In comparison to the previous volume, this is substantially higher volume, a signal that market dynamics are changing. This was followed by a retrace (marked B) where absorption happen and buyers reloaded. It was now clear, that buyers have shifted from being passive, to being more aggressive and we can enter the trade with much more clearly defined risk below the breakout rotation (A).

After we have found our access with well-defined risk, market lifted offers in the next 5-minute rotation and finally confirmed our trade idea with breaking out higher on nearly 16 000 contracts traded.

A combination of our understanding of how this flag was formed and a footprint chart to define the risk with much better precision can give us a much more clear idea on where and how to access the trade. Rather than entering blindly and in many cases too early, we were able to wait for the opportunity with much more favorable risk-reward.

In case you want to become an expert on how to read the footprint charts like those described above, consider checking our Footprint Trading Course.

Also, if you liked this article, you might check these as well:

• How to create and understand the Sierra Chart Footprint
• Price Ladder tactics managing big size
• How To Use Market Profiles In Your Morning Prep

Thanks for reading and until next time, trade well.

JK

Learn To Trade With The Footprint Tool & More

To learn to trade with the footprint chart and develop your career as an elite trader then check out our range of Trader ​Training courses. Our flagship 8 Week Career Programme can be attended live on our London Trading Floor or virtually from home as an online trading course. These are the most comprehensive training programmes in the proprietary​ ​futures​ ​trading industry and are based​ ​upon years of successful in-house skill​s ​development​.

Axia Futures
4 Endsleigh Street London GB WC1H 0DS
+44 20 3880 8500
https://axiafutures.com/

Social Media:
Facebook: https://www.facebook.com/AXIAFutures/
YouTube: https://www.youtube.com/AxiaFutures
LinkedIn: https://www.linkedin.com/company/Axia-Futures/

Contacts:
Demetris Mavrommatis – Co-Founder, Head of Trading
Alex Haywood – Co-Founder Head of Strategy

As such, we will do the same here in this blog. While we will be unpacking the technical aspects of using the Sierra platform, it’s worth noting that we also offer a complete course on Footprint Trading Strategies. That said, let’s dive in.

The first part of this guide will take an existing footprint and break it down so that you can understand the different choices made when creating a footprint chart and its final results. This will be done intuitively with descriptions along the way.

The second part of this guide will then be more linear and intended as a reference. It will go over the footprint study settings so we know where to focus most of our attention and where to find all the ‘fiddly bits’ that add more quality features to your footprint chart.

Do note, the second part is not wholly inclusive of all settings. Only the most relevant settings to beginner and intermediate users will be explained. A quick search within the excellent Sierra Chart documentation on their website is always a best practice when you are trying to uncover a niche setting.

NB: The footprint study in Sierra Chart is referred to as ‘Numbers Bars’

Part One: Understanding the Sierra Chart Footprint

I will start this guide by specifically addressing new traders who are also new to Sierra Chart.

A usual pitfall for this group is that they first load up the footprint settings and attempt to assemble a chart that ‘looks good’. To put it another way – there is no intuition behind what data they want to draw from the market and how to organise it effectively for edge. In essence they are hoping the settings will ‘show’ them something with ‘edge’ straight out of the box.

This creates two problems. The first is clear – disappointment and skepticism due to not finding footprint charts useful. Secondly, this mentality severely hinders effective and logical footprint construction from the ground up. This group usually finds the many choices within the settings overwhelming because they don’t know what to exclude from the footprint chart.

Therefore, the correct way of getting started is to design a footprint around a specific activity or order flow that you have intuitively noticed and understood yourself without the need for a footprint chart. Next, you should start to piece together the footprint chart by building it specifically to help you with that basic observation. Ask yourself “How would a footprint chart best be built to filter for this data? What would be the most effective and cleanest way to display this?” And so on.

In essence, to build a useful footprint chart you must have: Observation > Idea > Footprint build > Edge (or enhancement)

This is in direct contrast to the error mentioned previously where new users expect:

Footprint > Observation > Edge

Using the rationale above, we will use it to explain how our example footprint was built, why it has certain features and why it does not have others.

Building the Sierra Chart Footprint

This footprint was built to clearly display several order flow observations that have an impact on decision making.

A – Highlight of finished and unfinished auctions.

B – Red colouring of dominant selling at that price (hitting the bid). Volume profile also compliments to quickly spot large selling volume.

C – Volume profile as background type.

This footprint was made specifically to keep track of these three observations and later trading ideas built out of these observations.

Observation A – Fished auctions (122×0) after a protracted move would create a very ‘snappy’ or ‘flicky’ low on the price ladder. Often these created the low or bounce of a move. Inversely, contested auctions (unfinished) tend to get traded through until an actual finished auction is put in (tendency to trade back).

Idea A – Could we use this observation on a footprint to further give confidence that the move is retracing. Therefore fade the move or give confidence in a pull-back? Or could we use unfinished auctions at the high in a trendy low volatility day that the pullback is temporary and the trend will continue ?

Footprint Build– ‘Highlight Nonzero BidAsk Volume at High/Low’ (Ln:115) was turned on. Easy to spot finished and unfinished auctions.

Observation B – Strong selling at one price that generated good auctioning activity to sell lower can be retested and often prove to be a pullback high. Similarly in a breakout move lower, strong bidding could try and lift the price but gets held at one price (absorption).

Idea B – We could use these prices that stick out due to the colouring and volume shape to join or rejoin a breakout move on pullbacks. These locations often provide good risk – reward.

Footprint Build – ‘Column 1 Background Coloring Method’ (ln: 18) setting changed to ‘Based on AskVol/BidVol Percentage’. This setting uses percentages to determine the difference of the volume hitting the bid vs lifting the offer and colours the proportional difference.

Observation C – Different prices generate different levels of participation. On faster moves this change can be very obvious yet easy to miss during volatility. Are there patterns in this participation change?

Idea C – We could use the volume profile shape (as opposed to none or split) to show specific patterns. That we can copy from market profile and infer from auction theory to give context to future order flow.

Footprint Build – ‘Column 1 Background Type’ (ln:17). Changed to ‘Volume Profile’

This footprint was purpose build for just these three things. Therefore since we know what we want to see, it is much easier to build this footprint from the ground up and which settings are correct within the vast option of choices. As mentioned earlier, I know which options I do not want.

For example, in regards to background type. We do not want a split bid/ask profile as this doesn’t easily show the pattern or shape of the volume as we move to generate patterns. Likewise, we also do not want a full background as there is no shape to it at all. In regards to the finished/unfinished auction highlight. I added this specific functionality due to the original observation. It wasn’t added blindly for no use or reason.

Ultimately, what has this done? This footprint build has given me: clarity of data, purpose and understanding of what we want to see, and when to see it and finally provides an enhanced edge for order flow trading.

Part Two: Footprint Study Settings

The core logic of the footprint settings in Sierra Chart is based around 3 Columns:

Correspondingly, they appear on the chart like so:

Any changes you make to the ‘Column 1’ settings will make changes to the first column. The same is true for the other two columns.

The bulk of the work involved in setting up your footprint will be done within this part of the study settings.

Much of the time, most of your footprints will only use ‘Column 1’, while completely ignoring the other two columns. Be careful to not mix-up your settings across the columns as they will display incorrectly. Keep your footprint ‘logic’ all within one column.

It would be useful to regard the remaining columns as optional, separate and side-by-side footprints for differently composed information.

The most relevant settings here are always the first 4 options. ‘Numbers Bar Text’, ‘Background Type’, ‘Background Colouring Method’, ‘Text Colouring Method’.

Each setting has a numerical reference eg: (ln:17) or (ln:23) at the end of their name. These are ordered in the settings. For example, if this guide references (ln:100) then you can scroll down to (ln:100) in the settings to easily find it.

‘Numbers Bar Text’ and ‘Background Type’ is fairly self descriptive. The background and text colouring methods rely on ‘Ranges’. These range settings are used if you choose the settings ‘Based on AskVol/BidVol Percentage’ or similar. There is a vast amount of options here which certainly is overwhelming. However the previously mentioned setting is the most easy and simple to use and covers the requirements of most footprint charts. Otherwise the Sierra Chart documentation is a very good resource to get into the small nuances of each setting.

These percentages which can be set from (ln:91). By default they will be listed as 0.25, 0.5, 0.75. These 3 refer to Range 1, Range 2 and Range 3 respectively. Therefore you can adjust the sensitivity of the colouring from this setting.

The next area with ‘Pull-back Columns’ can be ignored for now. This section involves historical pull-back data supported in Sierra Chart. This fills a niche for a specific type of footprint and likely would only interest you as an advanced user.

Moving on, the next area deals with highlights and text colour. The ‘Default Text Color’ deals with the colour of the footprint numbers if you don’t have a custom text colours based on bid/offer or volume change variables. This custom colour option is located at the beginning the ‘column settings’.

The ‘Highlight Point of Control’ will reference that footprint specifically. This is not the same as the daily POC. Moreover, as with all the highlights you need to choose what column to display it in. Ideally this will be in the same ‘column 1’ as you are referencing all the settings so far – to keep everything together.

The actual inputs for the ‘Highlight Min/Max value In’ where you would specify the values are further down the study settings. They are located as ‘Highlight Max/Min Value Based On’ located at (ln:99)

The next section deals with more formatting and quality of life (easier on the eyes) settings. To replicate other footprint software you can separate the Bid/Offer values with any character. ‘X’ to display 200×500 or perhaps ‘|’ for 200|500. The other settings are font sizes which is worth playing around with to suit your own preferences.

Lastly, towards the bottom of the settings you will find the percentage settings for the colouring of the text or the background. Make sure you correctly put this into ‘Column 1’ if that is what you are using and not the rest.

As mentioned previously, these are not the entirety of the footprint settings in Sierra Charts. However they will be the most frequently used and relevant for the vast majority of footprints unless they would require something niche.

Good trading to you all,

Bogdan

Learn To Trade With The Footprint & Other Advanced Tools

To learn to trade with the footprint chart and develop your career further as an elite trader then check out our full range of Trader ​Training courses. Our flagship 8 Week Career Programme can be attended live on our London Trading Floor or virtually from home as an online trading course. We offer the most comprehensive training programmes in the proprietary​ ​futures​ ​trading industry which are based​ ​upon years of successful in-house skill​s ​development​.

Axia Futures
4 Endsleigh Street London GB WC1H 0DS
+44 20 3880 8500
https://axiafutures.com/

Social Media:
Facebook: https://www.facebook.com/AXIAFutures/
YouTube: https://www.youtube.com/AxiaFutures
LinkedIn: https://www.linkedin.com/company/Axia-Futures/

Contacts:
Demetris Mavrommatis – Co-Founder, Head of Trading
Alex Haywood – Co-Founder Head of Strategy