Footprint First Acquaintance

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Before making a decision, pay attention to the details, try to critically examine your opinion, nobody is immune from mistakes.

⇒ What might interest ordinary traders is the ability to interpret data in their favor. Making decisions not just based on the volume figures seen, but ideally also understanding what is happening at the current price at any given moment. Only such an approach will enable making informed decisions regarding planned transactions. Market information is a stream of data on current transactions.

Buyer – a trader who wants to buy an asset, or a Short Seller (stock market), a specialist, a market maker, who needs to close their position.

Seller – a trader who wants to sell their shares, or a Short Seller (stock market), a specialist, a market maker, who wants to open a “short” position.

Last Price – the price of the last transaction agreed upon by the seller and the buyer, it can be conducted either at the Bid or at the Ask. The Last Price is also referred to as the price of the last transaction in the trading session.

Sellers and buyers trading on the stock exchange can be divided into 5 major categories. They differ in trading style, volume, and influence. These categories include:

  1. Public or individual investors;
  2. Large financial institutions – investment banks, money funds;
  3. Computer programs;
  4. Market Makers;
  5. Specialists;
  6. Active traders.

Orders commonly used in exchange trading are:

  1. Buy Limit and Buy Stop (Buy Stop Limit) – Used for entering Long positions and exiting Short positions.
  2. Sell Limit and Sell Stop (Sell Stop Limit) – Used for exiting Long positions and entering Short positions.

Explanation of each order type:

  • Buy Limit: On the Footprint chart, it appears as a market transaction of someone entering a Short position via a Market Order Bid transaction. These orders are used for entering Long positions (clean transaction) or closing Short positions.
  • Buy Stop Limit: On the Footprint chart, it appears as a market transaction of someone entering a Short position via a Market Order Bid transaction. These orders are used for entering Long positions (breakout transaction) or closing Short positions (breakout transaction).
  • Buy Stop: On the Footprint chart, it appears as a transaction executed at the Ask, and this order becomes a Market Order. These orders are used for entering Long positions (breakout transaction) or closing Short positions (breakout transaction).
  • Sell Limit: On the Footprint chart, it appears as a market transaction of someone entering a Long position via a Market Order Ask transaction. These orders are used for entering Short positions (clean transaction) or closing Long positions.
  • Sell Stop Limit: On the Footprint chart, it appears as a market transaction of someone entering a Long position via a Market Order Ask transaction. These orders are used for entering Short positions (breakout transaction) or closing Long positions (breakout transaction).
  • Sell Stop: On the Footprint chart, it appears as a transaction executed at the Bid, and this order becomes a Market Order. These orders are used for entering Short positions (breakout transaction) or closing Long positions (breakout transaction).

For Market orders:

  • If two orders are received simultaneously, the one received earlier will be executed first.
  • If the specialist receives two orders simultaneously, the larger one will be executed first.

For Limit orders:

  • Orders offering the best price are executed first.
  • If the specialist receives two orders with the same price, the one received earlier will be executed first.
  • If the specialist receives two orders with the same price simultaneously, the larger one will be executed first.

There are three types of volume:

Tick volume – reflects the dynamics of price changes over a certain period of time.

Quantitative volume – represents the number of transactions made over a certain period of time.

Net volume – is the number of contracts (shares) bought or sold over a certain period of time at a certain price.

Net volume is the most interesting indicator. It indicates the interest of market participants in a certain price or price range. Price fluctuations reflect moments of funds entering or leaving the market. The market moves from one price with significant volume to another price with the same significant volume.

The importance of volume increases with the lengthening of the time frame. The longer the time frame, the more important the accumulation of volumes at a certain price level becomes. Although this is not an absolute rule, as sometimes the price may pass levels without significant delays, this usually happens after important events. However, there is always internal information that allows for timely preparation and entry into the market with large volume to absorb orders. This can be seen in horizontal volumes.

The strength of the level is formed by:

  • Volume rating.
  • Market reaction to the level.
  • Option contracts (open interest at the price level and traded volume).

BT

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