For long we have been using Market Profile and OrderFlow to determine and enter/ exit trades.
From the coming week, we take one step further in the process and introduce the FootPrint chart Live in the Room.
The Footprint does not require any introduction, as many of you associated with Market Profile for a while will know. What is does is within the intra day sphere, eliminates a bit of guess work by showing precisely the movement of volume within the bar.
Thus instead of being restricted to just the Open, High, Low and Close of a small bar ( say 5 minutes or even 30 minutes) we go inside the bar and get an inner view of the kind of volume which traded within the bar.
It can be used to confirm or deny our bias for an entry or even an exit location by looking at whether the broader market participants covered positions or added new at a particular price point
The chart below will be the new look of the OF chart in the Room next week.
( Can open chart in a new tab/ window by a right click on the chart)
An important point before we go into details of the chart.
The chart above represents traded volume and hence traded prices. Worldover the definition of OrderFlow varies from what is coming into the market in the form of buyers and sellers and typically called the OrderBook to Traded Quantities and Traded Prices and representing transactions which have occurred. In India when it comes to getting the OrderFlow Book most of us do not get to see beyond the top 5 volumes and prices. Whilst this study of the Orderbook adds a new dimension to trading, often it is not accurate as many individual traders and even institutions occasionally cancel orders or put them up front only for reactions and not trade. Thus this study has lots of uncertaintly even if we had a deeper DOM or depth of Market as it is called.
On the chart above we have
a) Volume of a 5 min bar represented as Sellers x Buyers. The sellers are on the left and buyers on the right. Since the OrderBook is read vertically by the market with sellers above and Buyers below it makes sense to read the traded prices as well diagonally to see how many sellers are there below for a buy order. The chart is annotated with an example of this .
In reading the OrderFlow it does not make sense to track every bit of volume in a 5 minute bar but to observe closely what the Market is doing at important reference points like the day vwap or previous day VAH or current DPOC or previous day low or even the hypo levels. The objective being to see that if we are buying into the market, we do not buy into a sea of sellers or the other way around. If more buyers show then we will see quick shades of green.
b) The extreme left of the chart is the delta of the day shown as difference of volume traded at price . Thus certain levels which have buyers through the day will be green and balance red. At important points like day lows and day highs it pays to have a quick look and confirm if buyers are interested in those prices.
c) The total traded volume in a bar is noted and the difference between the buyers and sellers is painted at the bottom in a pane which will give us a quick idea of buyers and sellers in the past columns of prices. This is a sum picture of the difference in volume between buyers and sellers
d) The chart lines we had earlier are all as before including Open, previous day high, previous day low, Current week High/ Low and previous week High/ Low. Also the IB will be yellow now instead of grey. The developing value areas will be shown as light blue for value high/low and dark blue for dpoc . These will be moving lines on the chart. The firmer brown lines are the previous day value high and low and will be visible on chart as brown dotted lines.
e) The duration of the chart candle is now set as 5 minutes.
f) The IB range and the Day range are in the left bottom as before
g) The previous day vwap is also highlighted as a price point in the chart.
If you have any questions please send them to me at vtrender@gmail.com