No transaction on the market ever happens just like that. Behind each bid and ask is a trader who has placed the order in accordance with a certain strategy or idea. Some follow the latest news and rumors, others analyze trend dynamics, and others follow signals. There are always arguments in favor of both purchases and sales, and the diversity of these arguments is ensured by the law of supply and demand.
At the same time, the quality of a trade depends directly on the instruments that motivated the trader to make the deal. Candlestick charts, bar charts with trading volumes, and several well-known indicators are included in the standard set of tools on any exchange. However, sometimes, trading platforms also create advanced, tailored tools, such as the Xena Market Barometer, which was developed by Xena Exchange. This barometer consists of interactive charts that reflect the moods of bulls and bears not on a single site but on the market as a whole. The combination of these instruments help traders make informed decisions and not err when choosing the direction of an order. In this article, we look at the first eight charts that have been added to the Xena Market Barometer.
The Printline graph allows users to monitor the history of a large volume that has formed a particular pattern and see in real time how the volume disappears at a certain price level under the onslaught of market powers.
The graph consists of two elements: the BTC_Reference index bars, which display the aggregate data on the Huobi, Coinbase, Bitstamp and Bitfinex exchanges, and the red-yellow lines, which show the current peak volumes in the order books of these exchanges.
The BTC_Reference index, which underlies this and the subsequent graphs, consists of BTC prices from four exchanges and is averaged by a complex adaptive formula that helps reflect the actual price of an asset. The lines show the total volume of orders in the order books of the four exchanges at a certain price. The redder the line is, the greater the volume is at that level. The larger the volume is, the less likely it is to be breached. So, by looking at the chart, users can easily see between which levels the price is heading.
The chart is especially useful for scalpers and intraday traders, as it allows them to open or close positions at the right time and avoid false signals.
Market Profile & Point of Control
The Market Profile is a horizontal histogram that shows the distribution of volumes by price within a selected timeframe. The higher the total volume of trades (or quantity, depending on the setting) was at a certain price, the longer the corresponding bar on the histogram is. The longest bar corresponds to the Point of Control, the point at which the largest volume or the largest number of transactions took place within the selected timeframe. By looking at this chart, users can visually determine the nature of some of the reversal patterns of price movements and find the optimal point to enter a position. In particular, a large volume of trades may correspond to a level of support or resistance.
If we pay attention to the height of the histogram, we can immediately assess the current market volatility and outline the trading range in which the price is likely to spend a significant amount of time. A narrow range of the histogram suggests a flat market, and in such a case, we have to be patient until we can catch a good profit movement.
It is also worth paying attention to the emergence of a new Point of Control, which can become a trigger for a strong price movement.
This chart allows users to look at volumes from a different angle. It focuses specifically on volume bursts and their structure. Every time the volume on the market is much higher than the average, a pie chart with the distribution of buy and sell volumes appears in the burst range. Volume bubbles help traders better understand the cause of price movements and predict short-term inertial price changes.
Oftentimes, volume bubbles occur in areas where there is a certain level of support or resistance, supported by a large volume. In such pie charts, we can see how strongly sellers or buyers are trying to break through this level.
Thus, if such a chart forms and the price level is not surpassed, we can assess whether this level will survive the next price onslaught simply by looking at the distribution of sell and buy orders. At the same time, it is necessary to take into account the information from other charts (for example, the Volume Heatmap) because the situation on the market changes every minute, and any price level can suddenly be filled with new volumes.
News can sometimes cause a strong movement on the market, so it is important to always be up to date. The news feed is designed such that the user immediately sees the most important topics likely to affect the price movement. Each news story is marked by importance and the cryptocurrency to which it is related, thus allowing traders to always ascertain the context of events.
The Long/Short Ratio graph shows the difference between the total volume of bids and asks in the order books of the exchanges. By looking at this graph, users can see the dynamics of the changes in the difference between supply and demand and determine the key points of trend reversal.
This graph can be used as an additional filter when making decisions. For example, it can be used to filter trend transactions, which should be excluded if there is a strong discrepancy between this chart and the Bitcoin price chart. If the price goes up and the long/short ratio goes down, the strength of the bulls is most likely waning, and a reversal is near.
Combined Order Book
The total order book of all the exchanges is presented in the form of an area chart. It shows the total volume of orders in the order books at each price within a 10% range. The graph resembles an altitude indicator on the dashboard of an aircraft, both in meaning and appearance. The indicator shows which way the volume is heading in the order book and allows traders to determine on which side the price will face the greatest resistance.
The graph helps users determine the general trend of a movement and understand in which direction they should open positions. If we see a strong preponderance of demand over supply, then we should refrain from opening short positions.
The total bid and ask volumes are displayed on separate line graphs that show the dynamics of the changes in the volume of orders in the order books. A special characteristic of this chart is that it only uses a certain range for calculations — 0.5% on each side of the current market price. This approach allows users to spot short-term trends and react to changes in market trends more quickly.
Special attention should be paid to the intersection points of the red and green graphs and the difference between them, which makes it clear on which side the short-term volume of the order book is concentrated. If the red line crosses the green from the bottom up, then the bears are prevailing over the bulls. If the green line crosses the red in an upward direction, indicates a rising pressure of the bulls.
The background color of this graph symbolize the distribution of volumes by price levels over the last two hours. Bright areas represent prices at which the trading volume exceeded the average volume by the variance. Darker areas correspond to prices for which the volume of trading was about average.
If the background is only present on one side of the price chart, the price will probably follow the path of least resistance towards the uncolored side. During trends, the background may indicate levels where the price can possibly stop, which can be good points to enter a position. Bright colors highlight strong levels of support and resistance, in which case the price is likely to stop before continuing its movement or making an U-turn.
The list of market trades has long been the most popular tool for analyzing asset behavior. A great investor of the last century, Jesse Livermore, analyzed printed tapes while just a teenager and predicted changes on the market as accurately as modern neural networks. The smart tape combines standard information about orders, rates, transaction times, prices, and volumes with advanced indicators integrated directly into the table.
The market speed indicator shows how active crypto exchanges are. Jesse Livermore tracked the behavior of prices in the tape — that is, the volume and speed of price movements. Because of the success of this approach, traders started to refuse orders (brokers at that time accepted orders based on the increasing and decreasing of prices, and they also acted as counterparties in each transaction) because they understood that they would have to give Livermore everything they had. The indicator simplifies the determination of the movement speed of an asset by presenting it on a scale from 1 to 10.
Additionally, the tape reduces noise due to the aggregation of small transactions. For example, if there was an iceberg in the order book or even just a large order from which small portions were “bitten off” over a short time, the total volume would be shown as one trade.
The improved classic market analysis tool helps users determine at a glance entry moments before sharp market movements. Each asset price has its own specific behavior, so the use of this indicator involves the independent identification of patterns and the study of volumes to determine optimal strategies.
We can use this tool instead of charts and try to trade like the cult traders of a bygone era. The ability to use tape transactions is a rare skill, but at the same time, it is very useful, as it helps gain a better understanding of price movements and clearly capture the moments before price impulses.
The idea of creating a unique and useful set of tools that will allow traders to monitor changes in the market as a whole formed the basis of the Xena Market Barometer. All the charts on it allow users to see things the standard exchange indicator set does not show, and the original visualization and ergonomic arrangement of the elements help traders quickly navigate the scope of information and make the right decision.
Our recommendations for working with graphs are based on data from the International Federation for Technical Analysis IFTA.