One of the most common problems traders face when reading technical charts is determining the right profit-taking and stop-loss points. The market ‘noise’ caused due to short-term volatility most often triggers a panic response, due to which traders exit the trade prematurely. By cutting out of winning trades early, they are not able to make the most of the opportunity, and capitalize on a potentially larger return.
Wouldn’t it be great if the technical chart could filter the market noise caused due to price fluctuations allowing you to make optimal trading decisions?
Footprint Chart is one trading chart you can use without getting side-tracked by market noise. In this article, you will learn what a Footprint Chart is and how traders commonly use the charts to make trading decisions.
The Footprint Chart is an effective technical indicator tool that offers 3 times more chart visibility as compared to others. It allows you to make accurate trading decisions based on information about trade volume, price, and order flow.
The chart presents organized data relating to price and volume. Traders can use the information to uncover trends and opportunities. They can use the chart to reflect on and validate trading positions, and make a trading decision with more confidence.
The Footprint Chart filters the noise inside the price bar allowing traders to gauge whether the price trend is gaining momentum or exhausting itself. The chart clearly reflects volume information at key areas of supply and demand that allow traders to better time their trades and set appropriate entry and exit points.
Traders can use different types of Footprint Charts that present different market information. The most common types of charts include the following:
Bid/Ask Footprint Chart – You can use this chart to find out whether buyers or sellers are influencing the price.
Footprint Profile Histogram – This chart shows the volume at different prices through a vertical histogram as well as a regular bar. You can use this chart to find out the prices at which the liquidity is pooling.
Volume Footprint – This type of Footprint chart segments volume by time and price. It is commonly used by traders to find effective take-profit points.
Delta Footprint – Traders use this chart to confirm price trends. The chart displays the difference between volume initiated by the buyers and the sellers at different price levels.
Traders can use Footprint charts to improve their trading decisions. The chart can be used to detect market reversals and validate positions. It provides a trading edge to traders as they can look at price and volume trends that are not revealed by other types of charts most of which are influenced by market noise. Using a Footprint Chart greatly enhances the market analysis for trades as they provide accurate details about the underlying market dynamics.
CFTC RULE 4.41 HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE INHERENT LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT BEEN EXECUTED, THE RESULTS MAY HAVE UNDER-OR-OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFIT OR LOSSES SIMILAR TO THOSE SHOWN.
Trading contains substantial risk and is not for every investor. An investor could potentially lose all or more than the initial investment. Risk capital is money that can be lost without jeopardizing one's financial security or life style. Only risk capital should be used for trading and only those with sufficient risk capital should consider trading. Past performance is not necessarily indicative of future results. All Software provided or purchased is strictly for educational purposes only. Any presentation (live or recorded) is for educational purposes only and the opinions expressed are those of the presenter only. Testimonials may not be representative of the experience of other clients or customers and is not a guarantee of future performance or success.
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Are footprint charts used in the methods taught at PFA?
How many footprint chart users in the world?