Two Types of Liquidity

Common Misconceptions About Volume Analysis

“More volume at the ask means more buyers” — no. Volume at the ask means aggressive buyers traded against the prices offered by passive sellers. Every such transaction also had a seller — the participant resting a limit order. The difference is not in the number of participants, but in who took the initiative.

High volume at the ask while the price is rising means aggressive buyers consumed the available limit sell orders. High volume at the ask while the price is falling can also occur: buyers are hitting the ask, but someone else is selling even more aggressively at the bid. Context is what matters.

“The price fell, so there were more sellers” — no. Every trade at the bid has both a buyer, represented by a limit order, and a seller, represented by a market order. Their numbers are equal. The price fell because aggressive sellers consumed the passive liquidity resting at the bid.

“The market maker manipulates the market” — an exaggeration. A market maker earns from the spread, not from market direction. They do not “move the price to trigger stops.” Manipulation does exist on exchanges — spoofing, for example — but it involves different participants and is a separate topic.

“High volume confirms the move” — the misconception is that if a candle closes with high volume, the move is genuine and will continue. In reality, volume shows the intensity of participation, not direction. The same volume spike can mean opposite things depending on who created it and where it appeared.

“Volume analysis is too complicated and only for professionals” — the misconception is that reading clusters and profiles requires years of experience and specialized knowledge. But the basic mechanics are simple: the market consists of aggressive and passive participants, and volume records their interaction. The difficulty lies not in the tools themselves, but in applying the right context — understanding whether the market is trending or balanced and which structure you are currently analyzing.

“Volume analysis replaces risk management” — the misconception is that once you learn to read volume accurately, you can use a larger position size because you know where the price will move. The reality is that no form of analysis can provide 100% certainty about the next move. Volume explains what has already happened and provides a probabilistic context, not a guarantee. A professional market participant who reads volume well still limits risk on every position.

“Volume analysis works worse than it used to because markets have changed” — the misconception is that volume analysis was created in the 1990s for floor traders, while algorithms now do everything, making the method outdated. In reality, the underlying mechanics have not changed: price still moves toward the area where the aggressive side consumes passive liquidity. Algorithms execute transactions, but they do not eliminate supply and demand. What has changed is the speed and complexity.

From Candlestick to Footprint

The matching engine connects orders every second: aggressors move the price, while passive participants create the market structure.

A candlestick chart does not show this process. It can only display OHLC data: open, high, low, and close.

Let’s take a specific example: a green ES candle, up 3 ticks, with a volume of 12,000 contracts. On a standard chart, this looks like a bullish signal. But what actually happened inside the candle?

Now open the footprint and compare bid and ask volume at each price level.

Scenario 1. At every level, ask volume is several times higher than bid volume. Total for the candle: 11,000 at the ask and 1,000 at the bid. Delta: +10,000. Aggressive buyers applied pressure at every tick, while sellers offered little resistance. The footprint confirms that the candle is genuinely bullish.

Scenario 2. Ask and bid volumes are almost equal across the levels: 5,900 at the ask and 6,100 at the bid. Delta: −200. Against a total volume of 12,000, this is noise. The candle closed green only because one large market buy occurred in the final second. The footprint shows not a trend, but a struggle in which neither side gained control.

Scenario 3. Bid volume dominates at every level: 3,000 at the ask and 9,000 at the bid. Delta: −6,000. Aggressive selling is twice as high as aggressive buying, yet the candle is green. The footprint makes this visible immediately: the left column, bid, is heavier than the right column, ask, at every price level. For someone reading only candlesticks, this looks like a bullish signal. For someone reading the footprint, it is a warning sign: the price moved upward through a thin ask, while sellers were already building a position.

The same candle. Three different footprints. Three different interpretations.

The mechanics are now clear. The next step is to connect them with what you already know: levels, patterns, and trends. Volume analysis does not replace price action — it adds a third dimension. In the next module, we will examine how they work together.