Volume footprint charts: a complete guide
CONTENTS:
What is a volume footprint chart
A volume footprint is a powerful Supercharts' tool that visualizes the distribution of trading volume across multiple price levels for each candle on a specified timeframe, providing traders with additional information to help identify areas of high liquidity or significant trading activity.
By default, this chart type displays the distribution of seller volume to the left of each candle and buyer volume to the right, with optional gradient colors that indicate the relative intensity of the volume at each level. It places vertical lines beside levels in the distributions to highlight significant areas of imbalance.
Additionally, it shows each bar's Value Area (VA) and Point of Control (POC), and displays volume delta and total volume information below each candle.
Calculation
Volume data source
This chart type retrieves a symbol's volume data from multiple intrabar intervals (intervals lower than the chart's) for its historical calculations. The interval gradually increases as available historical data becomes exhausted, starting with the lowest available interval. In other words, the deeper into the chart's history you go, the higher the intrabar interval of the volume data. The footprints for the chart's recent candles are the most precise since they use the most granular information in their calculations.
The order in which the chart requests intrabar intervals for its calculations is: 1 second, 1 minute, 15 minutes, 60 minutes, and 1 day. The highest intrabar interval requested for historical footprints depends on the chart's interval.
Volume categorization
The volume footprint chart categorizes volume as "buy" or "sell" based on the direction of intrabar price movements.
It uses the following algorithm to determine the category of each volume value:
- If the intrabar's closing price exceeds its opening price, it assigns the volume to the "buy" category
- If the intrabar's closing price is below its opening price, it assigns the volume to the "sell" category
- If the closing price equals the opening price:
- The volume will belong to the "buy" category if the current intrabar's close exceeds the previous intrabar's close
- The volume will belong to the "sell" category if the current intrabar's close is below the previous intrabar's close
- The volume will belong to the same category as the previous intrabar if their closing prices are equal
The chart accumulates the categorized volume across the lower intervals at different price levels to construct the footprint representation.
Imbalance Detection
A balanced market occurs when there's equilibrium between supply and demand, typically resulting in relatively stable prices. In contrast, an imbalanced market occurs when there is a significant disparity between supply and demand, often leading to more substantial price movements.
The volume footprint chart detects a buy imbalance when the "buy" volume at a price level exceeds the "sell" volume at the level below by a specified percentage. Similarly, it detects a sell imbalance when the "sell" volume at a level exceeds the "buy" volume at the level above by that percentage.
Users can control the percentage by which the "buy" volume must exceed the "sell" volume, or vice versa, to detect an imbalance through the "Imbalance" input in the chart's settings. By default, this value is 300% (i.e., the volume of one side must be three times larger than the other).
When it detects a "buy" imbalance, the chart will display a vertical line to the right of the corresponding price level. When a "sell" imbalance occurs, a vertical line will appear to the left of the level.
In the given example, a sequential comparison of volumes at different levels is carried out. For each comparison, the assessment determines whether the larger volume of the pair exceeds the specified imbalance threshold, according to the formula: max(buy, sell) ≥ (imbalance percentage / 100) * min(buy, sell).
The initial calculation is as follows: 506.37 ("buy") ≥ (300 / 100) * 166.433 ("sell"). This statement is true, indicating a buy imbalance. Subsequent comparisons follow the same logic: "buy" level 3 is compared with "sell" level 2, and "buy" level 4 with "sell" level 3.
Traders often analyze volume footprints to identify balance and imbalance within the market.
When a market is balanced, a volume footprint may show evenly distributed trading volume across various price levels, suggesting stability and equilibrium. Conversely, when in an imbalanced state, a volume footprint may reveal clusters of elevated trading activity at specific levels, indicating areas of supply or demand disparity and potential price trends.
Interpretation
Order Flow
During the order execution process, market participants engage in a search for price equilibrium that will satisfy both buyers and sellers, thus driving transactions. The directed volume of each transaction determines its contribution to a market's buying or selling pressure.
When supply surpasses demand, downward price movement may occur as the market moves toward more equitable prices for buyers. Conversely, when the demand for an asset exceeds its supply, prices may rise until enough participants are willing to sell.
Analyzing the concentration of buying and selling activity across price levels with the volume footprint chart can provide deeper insight into the dominance of buyers and sellers, the balance or imbalance between supply and demand, and areas of elevated liquidity (i.e., areas with a greater abundance of trading activity). Traders can utilize such insights to gauge market sentiment and identify trading opportunities.
Failed Auction
In Auction Market Theory, a failed auction is a pattern in which the market fails to establish a new price for an instrument, resulting in a return to previous prices. Traders conventionally analyze failed auctions with tools such as "Market Profile," but they can also identify instances of such patterns using footprints.
A failed auction typically occurs when one side of the market, either buyers or sellers, fails to attract enough participation to sustain trading activity at a price level, potentially leading to a rapid price reversal as market participants reassess and adjust their positions. Failed auctions often coincide with heightened volatility, and they can indicate potential key turning points in the market.
Traders and analysts often pay close attention to failed auctions, as they can provide valuable insights into market dynamics and trading opportunities. Identifying failed auction states can help traders identify support and resistance levels and anticipate potential reversal patterns.
The example below demonstrates a case where prices moved successively higher with each bar while buyer volume gradually decreased. On the fourth bar in the image, the imbalance between sellers and buyers reached a point where buyers could not push the price further upward, and the price rebounded downward.
You can interpret this area of imbalance as a possible resistance level. If prices break through this level in the future, it might suggest a growing trend.
Delta Divergence
Delta divergence in volume footprints refers to a discrepancy or disagreement between price movement and volume delta.
Positive delta divergence occurs when prices successively move downward while the volume delta rises, possibly even turning positive. Conversely, negative delta divergence occurs when prices successively rise while the volume delta falls or even becomes negative. These divergence patterns often suggest that, despite the current price action, the underlying buying or selling pressure is diminishing, potentially signaling the weakening or reversal of the current trend.
The example below shows four falling bars, two of which have a positive delta. In other words, those bars exhibit positive delta divergence.
Traders often analyze delta divergence in footprint charts to help them anticipate potential reversals or changes in market direction. However, it's essential to consider other factors and utilize additional tools to help validate divergences and make informed trading decisions.
Excess trades at extreme price levels
In Auction Market Theory, the market price rises until demand is exhausted and falls until supply is exhausted. This exhaustive movement represents a complete auction. On a footprint chart, this situation appears as zero or minimal purchases at the low price level or minimal sales at the high price level.
In some cases, a situation referred to as an incomplete auction may arise, where the difference between buying and selling volume at the high or low levels differs only slightly relative to the differences at previous levels. This condition may indicate that price exploration is incomplete, and there may still be interested market participants above the current highs or below the current lows. In essence, this pattern might indicate that the market price may continue its directional movement beyond the current range until the auction is complete.
Settings
Customization options for the volume footprint chart are available from the chart settings, which you can access from the gear button in the toolbar above the chart.
Candles
The settings in the "Candles" section are identical to those for a regular candlestick chart. From this section, you can configure the appearance of the candlesticks.
Volume footprint
Row Size
Controls how the chart will determine the size of each footprint row (level). There are two options to choose from:
- The "Auto" option specifies that the chart will calculate the size automatically based on the data's latest normalized Average True Range (ATR) value. It uses the formula: 0.2 * NormalizedATR / MinimumTick. The chart recalculates the size when selecting the "Volume footprint" chart type or changing the symbol or timeframe. When using this option, the input below specifies the length of the ATR calculation
- The "Manual" option specifies that the chart will utilize the number of ticks specified in the "Ticks per row" input below
ATR Length
Specifies the smoothing length for the Average True Range used to calculate the number of ticks per footprint row when the "Row size" input uses the "Auto" option.
Ticks per Row
Specifies the number of ticks per footprint row when the "Row size" input uses the "Manual" option.
Display
Specifies the display type of the chart. In Cluster mode, all cells have the same width. In Profile mode, the width of each cell is proportional to the trading volume at that level, offering a clearer, more dynamic representation.
Type
Defines the display mode of the footprints on the chart. Four options are available:
- The "Buy and Sell" option (default) displays seller volume across levels to the left of each candle and buyer volume to the right
- The "Delta" option will display one column to the right of each bar that shows the volume delta (i.e., the difference between buyer and seller volume) for each level
- The "Total" option will display one column to the right of each bar that shows the total volume at each price level
- The "Ladder" option will highlight with color the highest volume at each price level
Apply Gradient to Background
If enabled, the color of the background of each footprint level will differ based on its volume compared to the volume at other levels. The chart uses the following algorithm to calculate the gradient colors:
- Determine the maximum and minimum volume
- Calculate the volume range, i.e., the difference between the maximum and minimum volume value
- Subtract the minimum volume from the current level's volume
- Calculate the ratio of the value obtained in step 3 to the volume range obtained in step 2
- Use the ratio from step 4 to select a color from the available options:
- Select the first color if the ratio is less than 0.25
- Select the second color if the ratio is greater than or equal to 0.25 and less than 0.5
- Select the third color if the ratio is greater than or equal to 0.5 and less than 0.75
- Select the fourth color if the ratio is greater than or equal to 0.75
- Repeat steps 3 through 5 for each price level
When the footprint type is "Buy and sell" or "Delta," the chart calculates the gradients for the buy and sell sides separately.
Background
These inputs specify the background colors used by the footprint levels. Users can choose separate colors for buy and sell sides when the footprint type is "Buy and sell" or "Delta".
If the "Apply gradient to background" option is enabled, a four-color gradient will be available for each color option. The chart will select colors for each level using the algorithm described in the previous section.
Value Area
Enables Value Area (VA) lines and specifies the VA percentage. The Value Area High (VAH) line will appear above all levels included in the Value Area, and the Value Area Low (VAL) line will appear below all levels in the Value Area. The volume footprint chart's Value Area algorithm is similar to the algorithm used by our Volume Profile indicators.
Labels
POC
Determines whether the chart will display each footprint's Point of Control (POC).
Show Summary Info
Determines whether each footprint will display information about the bar's total volume, the total buy and sell volume, and the overall volume delta.
Imbalance
Specifies the percentage by which buyer volume must exceed seller volume, or vice versa, to detect a significant imbalance. See the "Imbalance detection" section above to learn how the volume footprint chart detects imbalances.
Highlighting
Determines whether the chart will highlight imbalanced price levels and specifies the colors. When imbalance highlights are enabled, the chart places colored vertical lines to the sides of significantly imbalanced levels. The chart displays buy imbalance markers to the right of the levels and sell imbalance markers to the left.
Stacked Levels
Controls whether to display stacked imbalances and the number of required consecutive levels with an imbalance on the same side to detect a stacked imbalance. When enabled, the chart projects stacked imbalances until subsequent prices intersect the levels.
Volume footprint in a nutshell
A volume footprint chart is a powerful trading tool that displays the distribution of buying and selling volume at each price level within individual candles on your chart. Unlike traditional charts that only show price movement, volume footprints reveal the underlying battle between buyers and sellers by categorizing volume based on whether prices moved up or down during smaller timeframes. The chart displays seller volume on the left side of each candle and buyer volume on the right, with gradient colors and vertical lines highlighting areas of significant imbalance where one side overwhelmingly dominates the other.
This detailed volume analysis helps traders identify key market dynamics such as failed auctions, delta divergence, and areas of high liquidity that traditional price charts miss. By examining where the most trading activity occurs (Point of Control) and detecting imbalances between supply and demand, traders can better understand market sentiment, spot potential support and resistance levels, and anticipate price reversals or continuations. The footprint essentially transforms volume data into a visual roadmap of market behavior, making it easier to time entries and exits based on actual trading activity rather than just price movement alone.
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