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Using the Footprint Chart on the German FDAX

 In ATAS the trading platform, Order Flow Trading, Uncategorized, Volume Trading

The DAX is the German stock index, calculated on the basis of the shares of the 30 largest and most liquid German companies. This is a very volatile tool that offers traders extensive trading opportunities. On the FDAX, you can effectively use almost all the strategies for the footprint chart described in previous articles.

Compared to the well-known US stock indices, this index is rather illiquid, so large traders are forced to buy and close positions at different prices due to the high volatility. In this market, there are often strong and unexpected price fluctuations in a wide range. As it is a European instrument, there is a sharp increase in volatility twice during the day. The first jump takes place during the opening of the European session and the second – at the beginning of the American session. The FDAX is very suitable for trading within a day, day trading.

In this article:

  • Principles
  • Examples
  • Chart Settings


Principles

In the following examples, we focus on dealing with outbreaks. These occur when the price leaves the consolidation zones. Most of them can be observed when the price leaves a continuation pattern of a trend. A Consolidation zone is nothing more than a pause in the current trend. Some of the most famous patterns are triangles (ascending, descending, symmetrical), flags, pennants, wedges, and rectangles.

It is extremely important that the trader understands what this pattern looks like and how it can be interpreted correctly with the help of the footprint. For example, dhe cluster at different prices to the trader valuable information about how the distribution of the volume in these zones took place.

Outbreaks should only be considered when a high volume is displayed. A comparatively low volume can indicate a wrong signal with a high probability. Thanks to the colouring of the footprints, it is very easy to visually determine which volume is involved in the eruption, as well as the specific prices at which the highest volumes have been exceeded.

As shown in Figure 1, after the collapse of the resistance level, the futures price of the Dax index rose at 12896. After that, there was a pause in the current trend, during which the market began to consolidate. The consolidation area in the chart is highlighted by a dotted line in the form of a rectangle. Before the price of this consolidation erupted, there was a slight positive advantage over buyers. This is clearly shown by the Statistic cluster, according to which each bar of this consolidation was marked by a positive delta.

Picture No1 – FDAX Chart based on volume with 1000 contracts

Thus, the Foopprint chart helps to identify the amount of volume traded and the prevailing trend in the market before the breakthrough. This allows us to better estimate the probabilities.

Footprint profiles are a practical visual representation of trading information. You can use this analysis tool to assess the probability of a false signal. Profile shapes allow you to see where large quantities have been traded on the market, and color and intensity – to determine the tendof of one side or the other of the market. All this information is updated in real time in the ATAS platform. This allows you to open or close positions in time.

As shown in the example above, delta bars can show the direction of the potential breakout during consolidation. This allows entry into the market with the expectation of a breakthrough. However, such trades should be closely monitored and hedged, as there is no need to make a breakthrough in the predicted direction.


Examples

A footprint chart can also help a trader determine which side of the market prevails in the key zone – “aggressive” sellers or buyers. In order to better understand the price potential, one should examine the dynamics and structure of the market, at least for the current day. It is necessary to get an idea of what the market has done so far. This can help determine the probability of a breakthrough and better interpret the information provided by cluster statistics.

Chart #2 is an excellent example of the upswing of the FDAX. Notice how a high volume was maintained in the breakdown of the resistance level at 12330.5 and delta within the bars was mainly green. All these parameters are signs of a real burst of level.

Picture No2 – FDAX Tick Chart based on 377 ticks


An example #3 is a delta-calculated chart with a value of 150 contracts. For the Dax, this delta value is rather short-term and is suitable for finding trends of this financial instrument and then controlling trend stability.

Such a visual representation of the transactions (order flow and trading volumes) available to users of the ATAS platform expands their trading opportunities and gives confidence in trading.

As you can see from the cluster statistics indicator at the bottom of the chart, each candlestick of the upward movement on the right is indicated by a positive percentage of the delta. This suggests that the initiative is in the hands of buyers. Therefore, you should consider this information when analyzing the strength of the current trend.

Picture No3 – FDAX Chart based on Delta with 150 contracts


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