Order flow and footprint charts

You can explain what a footprint chart shows, calculate volume delta and say why order flow data has gaps and limits.

Who was in a hurry?

A candle tells you where the price opened, where it went and where it closed. It does not tell you how it got there: whether buyers were rushing to buy, or sellers rushing to sell.

Order flow tools try to answer that. They look inside the candle, at the individual trades. This lesson explains what they measure and why the picture they give is still incomplete.

Bids hit, offers lifted

The lesson on order flow in the markets chapter introduced the aggressor: the side of a trade that crosses the spread with a market order. Every trade has a buyer and a seller, but only one of them was in a hurry.

An aggressive buyer lifts the offer, buying at the ask.
An aggressive seller hits the bid, selling at the bid.

In the order book above, a market buy order fills all the offers at 100.02 and 100.03. The best ask moves up to 100.04. Aggressive buying moved the price.

Order flow tools count trades by aggressor:

A footprint chart shows, inside each candle, how much volume traded at each price, split into trades at the bid and at the ask.
Volume delta is the volume at the ask minus the volume at the bid for a candle or period. Positive delta means aggressive buyers traded more; negative delta, aggressive sellers.

The data has limits:

Absorption. Aggressive buying can meet large passive sellers who absorb it without the price rising. High positive delta with no progress can mean the buyers are being absorbed.
Incomplete data. Exchange-traded futures and shares report trades centrally. Spot forex is traded over the counter, as the New York Fed's foreign exchange committee describes, so no platform sees all trades. Order flow there reflects one provider's clients.
Speed. Much of the flow is algorithmic and changes within milliseconds.

Delta +2,700

Here is one fictional five-minute candle in an index future, split by aggressor.

4,800 contracts traded at the ask, bought by aggressive buyers.
2,100 traded at the bid, sold by aggressive sellers.
Total volume: 6,900. Volume delta: 4,800 − 2,100 = +2,700.

If the candle also closed near its high, the order flow and the price agree: buyers pushed and the price followed. If it closed near its low despite the positive delta, the aggressive buying was absorbed by passive sellers, a very different story. The footprint does not say what comes next. It describes the fight inside the candle.

Common mistakes

Reading delta as a forecast. It describes who was aggressive in the past.
Ignoring absorption. Strong buying without price progress can be a warning.
Trusting forex order flow like futures data. It shows only part of the market.
Overloading the chart. Footprints add a lot of detail, and a lot of noise.

The takeaway

Order flow tools split volume into trades at the bid and at the ask. They show who was aggressive, not who wins next.

Check yourself

Quick quiz

4 questions. Instant feedback, nothing is saved.

1Tap the offers that the aggressive buy order filled.

Tap the chart.

The market buy took all the offers at 100.02 and 100.03. Aggressive buying lifted the best ask to 100.04.
2In one candle, 4,800 contracts trade at the ask and 2,100 at the bid. What is the volume delta?

Delta = volume at the ask − volume at the bid = 4,800 − 2,100 = +2,700. Total volume is 6,900.
3What does a footprint chart show inside each candle?

It adds an order flow view to each bar: at which prices volume traded, and which side was aggressive.
4Why is footprint data less reliable for spot forex than for exchange futures?

Exchange-traded futures report all trades centrally. Over-the-counter markets like spot forex show only one provider's flow.

of 4 correct.

Sources

Back to Technical Analysis