Market Delta strategies

Discussion in 'Strategy Development' started by newbie2006, Oct 4, 2006.

  1. In another thread discussing identifying trending and ranging days I suggested using market delta, some fellows got interested (mainly billp) and we had some PMs discussing the subject as not to get off topic in the other thread.

    We agreed to have a dedicated thread for this subject to benefit other traders and to get some helpful insight from others.

    In the following posts I will summarize what we were discussing so we can get this thread going.

    So anybody (expert or newbie like me :) interested in the subject of market delta and how to use it to create a trading strategies or to enhance other strategies are invited here.
  2. ok, lets first define what is market delta,
    I am not sure if there is an official definition but simply its the difference between the total number of shares traded on the Ask and Bid.

    lets take an example, AAPL is being quoted $75.55x75.56, now someone hit the ask for 500 shares.

    market delta = +500

    then someone hit the bid for 200 shares

    market delta = +500-200 = +300

    and keep on counting the same way.

    Usually traders focus on price and some technical indicators (which is fine), but the number of shares that exchange hands (volume) and its relation with how the price act can tell a thousand words.

    ok, for now lets say that when the market delta is increasing this means that buyers are more aggressive than sellers and vice versa.

    Usually aggressive buyers don't just place bids they directly hit the ask adding to the delta.

    In my next post, I'll use the above information to develop some simple strategy having very high probability win %
  3. Delta to me is, "the conviction of the order flow".

    I enter trades when I see shifts and/or divergence of the per bar delta. Delta measurements allow me to spot shifts in the conviction of the order flow to enter higher probability trades.

    Here is the delta divergence with shift to positive for a LONG trade entry near todays LOD..........

    I use the delta information to enter trades when the pendulum is swinging from full left to the center in the middle of the shift in conviction. I want the continued pendulum swing of conviction to full right, to be the burst of momentum that puts my position very quick to at least 1 point in the money. This of course is a timing and positioning issue that is best enabled by having the ability to precisely track order imo is by far the best way to do this.
  4. slacker


    Great thread.

    5Pillars, what is the indicator on your chart below the delta indicator? What are you using to confirm a change in order flow?

    Thank you
  5. When I saw the title of the thread I was convinced it was started by the one-man Market Delta + Market Profile evangelist 5Pillars.....

    ...but it has been started by someone else :D

    Look forward to the discussions on this topic that ensue.

  6. Glad you did not put a 100 lot on that would have just stopped out....OUCH!!! :D
  7. I use the middle pane "delta" two color line indicator to watch candle-by-candle delta. The bottom pane is two Ergodic's (True Strength Index)....a 5/20 [O+H+L+CL/4] slow line and a 3/12 [O+H+L+CL/4] fast line overlayed. I have horizontal reference lines added at +50, -50, and the 0 line for strength of momentum reference.
  8. Passion is fortunately a big part of my personality.
  9. 5Pillars-

    I have been reading you in several other threads(ET) and would like to duplicate your chart set-up on
    Tradestation.......any input would be grateful

  10. I am not sure how the delta could be done with may need to check out the TS forums to see if anyone has some code?

    My ES charts are 317 tick so go from there.
    #10     Oct 4, 2006