Bid-Ask Chart confusion

I am confused on two points of the Bid-Ask Volume candle chart:

  1. Do the contract counts represent limit orders from the order book, or executed transactions from time & sales?

  2. The right side of the candle may show 100 contracts at a price. That represents contracts at the ASK, which seems bullish to me. However it is color code in red. So, maybe I misunderstand the chart?

The DOM and BAV charts can be confusing due to the color coding which is based on the intent of the limit order, rather than the market order. The side (bid or ask) represents the side the limit order originally rested on, and in the BAV chart, the contract counts are executed transactions, i.e., market orders that filled a limit order at XYZ price.

  • Contracts on the right hand side (the ASK) are executed transactions, which represent market orders that filled limit orders at the ASK. Those limit orders were orders to SELL / go short / sell-to-close (when filled), and they were filled by market orders to BUY. The RED is implying the intent of the limit order since it was a sell intent, but the actual aggressor action was a buy action.
  • Contracts on the right hand side (the BID) are executed transactions, which represent market orders that filled limit orders at the BID. Those limit orders were orders to BUY / go long / buy-to-close (when filled), and they were filled by market orders to SELL. The GREEN is implying the intent of the limit order since it was a buy intent, but the actual aggressor action was a sell action.

Thank you for the clear explanation.

This probably go against all the theories of this type of chart. But I reversed my candle colors to represent an actual visual of what the order types are doing to price. It took alot of the confusion out for me because it visually represents what the transactions are doing after they clear the DOM.