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if I may add another topic that's also important. when dealing with footprint charts, I only use range charts. the reason is I want to compare delta with price and not necessarily with time or number of trades. I don't need several bars at the same price level just because time is up. the same goes for unfinished business. you might get a bar with unfinished business just because it was time for a new bar.
also these divergences are very helpful, one has to be careful. you can't take every signal blindly. especially in the environment we have right now. you still can get some useful information, but mostly outside of rth these days:
This is a great topic. The cumulative delta is on both FT71's chart and MBox Mike's using the MBox system. I'm gonna dig into this too because I don't understand it a lick either. Any recomendations on a good order flow indicator? I've seen the one on Ninjacators but have no idea if it's any good. Thanks, everyone.
Good ideas -- here are some thoughts on some of them:
Ok, except that if the bars are aggregated based on time or volume, then the close is purely random, and you shouldn't base anything on it. If it's range-based (range, renko, point&figure), then at least you have some kind of guarantee that the price either reversed or continued a certain amount, which gives a bit more weight as to how it closed. That is, the close may be arbitrary, but at least it is based on the price range and meaningful in relation to the open. See my uber controversial (not really) "Close of a Bar or Candle is Meaningless" thread.
In general I agree and recommend that you look into the Wyckoffian concept of effort vs result and VSA principles, if you have not already, as these methodologies capture this nicely.
Maybe. This really depends on the nature of the consolidation and the way it goes down and back up, but perhaps this is simply a false breakout. Imagine a case where the market consolidates on heavy volume, and breaks down. Buyers bail, new longs take the other side. It trades back up and is back at the high volume price of the consolidation. The original longs have largely puked, so who's there to sell? Only the new buyers. Maybe some will, maybe others will have even more confidence that this was a false breakdown and will now feel confident to enter long here.
So, yes, sometimes it works the way you described, but I wouldn't generalize it that way.
What you're describing is basically a "ledge" -- heavy volume at the extreme of a range. For example, the market has spent some time near the high of the day, has rotated, seen sellers take control, and now rotates down. In this case, if you don't have a good taper in the profile at the high, you would call this a "poor high" and expect the market to prod beyond it to test whether buyers will continue.
I would be cautious about doing this on a per-bar basis though, again, due to variations in the way bars are formed. You seem to be saying "if the low price of a bar goes offer, there's unfinished business" ... well, this depends on the instrument in part (Nikkei futures, due to its 5-point tick increment, notoriously will often have a low tick that went offered as the cash index in fact ticked below the low but the futures did not).
You are absolutely right about the principle though, and just don't look too much at this level of detail at a single tick on a single bar. Rather, understand this principle (excess -- maybe the most important MP concept to understand IMO) and adjust to your time frame.
An example of a trade based on the above idea of a ledge. The trade is a scalp.
I got home just in time to see 3019 being bought repeatedly over the course of a half hour. This may be my favorite trade setup, because it's as close to guaranteed to work as anything you will ever see. See the attached DOM picture for the real "ledge" view.
I don't have any quantitative data on this, because it doesn't happen this cleanly too often, but when I see this, I take it every time, no matter what, no questions asked. The market just does not let someone buy like that and never tick down. In this environment it's good for a few points.
The only edge in orderflow is at the edge of the bars . In the middle , you will soon find out that its useless to see. See the bars at the areas of interest .
Practice in Sim the entries. Observe only the delta volume at support and resistances. In that levels if delta is possitive Buy if negative Sell.
The rest is complicate the trading.Anyway its not magic, it could fail, or fake volume. Its a tool like others