I promised to start a thread on how Iâm using Market Delta. Iâm rather hoping some other competent MD users will pitch in and we can kick around some ideas. Market Delta as a tool hasnât been around very long, and indeed only several months in the Investor/RT guise, so I think weâre all still discovering what this sexy little tool is capable of. There is no how-to guide for MD â everything that I will present here is based on my own conclusions, hence Iâm quite happy to have my views challenged. Iâd like to learn something from this exercise also.
This should be a fun thread because any discussion about MD will invariably lead to the actual nuts and bolts of how markets really work.
A few qualifying statements:
1. This thread will primarily be centered around daytrading futures. I don't trade nor am I qualified to discuss trading stocks.
2. Market Delta fits hand in glove with auction market theory and Market Profile. Having said that you can use MD effectively without a deep understanding of the latter two concepts. However, I donât want the thread to go off on MP tangents. I have written at length about MP on another thread (which needs updating someday).
3. Market Delta is (now) fully integrated with Investor/RT. It is not possible to discuss one without the other. So the discussion will necessarily be product specific.
Right, we need to start with some fundamentals â get the concepts bolted down as it were. I stated in a previous thread MD is in its simplest form a tool for analysing T&S. This is not necessarily incorrect but on reflection it really doesnât do justice to the product. Hereâs a better description:
Market Delta is tool for measuring and analysing market activity in terms of itâs three dimensions - time, price and volume â utilising the bid/ask spread to infer something about the nature of each transaction.
What do I mean by this? MD assumes that trades that occur at the bid are a sell transaction (and buying at the offer obviously). The rationale being that the initiating party is motivated enough to pay the spread â ie: he/she really wants to buy/sell at that price at that time. Now is this a valid assumption? â this could be rather contentious. For the most part yes it works fine so the assumption ipso facto is valid â¦â¦.. but not always. Sometimes MD will show buying taking place but the market keeps heading lower. And letâs not lose sight of the fact that there are two parties to every transaction with potentially different time-frames, objectives and motivations. Weâll talk more about these important points in a later post.
So what do I actually use MD for?
1. Assess buying and selling pressure.
2. Determine support/resistance levels or potentials thereof.
3. Study trade facilitation.
4. Analyse the actions of big vs small traders.
5. Fine tuning entries/exits.
Iâll go through these in some detail later.
Now if you had asked me a year ago what I use T&S for I would probably have given you a similar list. However, I'm the first to admit I was never a really good tape reader - but now I am because I have right tool for the job.
My use of MD is fairly short term â typically 5 mins charts or less. I find MD of limited use over longer timeframes but Iâd be interested in other views on this point.
Thatâs it for now. In the next instalment Iâll talk about the various MD charts and indicators and how I have my workspace configured.
All the best,
bolter
This should be a fun thread because any discussion about MD will invariably lead to the actual nuts and bolts of how markets really work.
A few qualifying statements:
1. This thread will primarily be centered around daytrading futures. I don't trade nor am I qualified to discuss trading stocks.
2. Market Delta fits hand in glove with auction market theory and Market Profile. Having said that you can use MD effectively without a deep understanding of the latter two concepts. However, I donât want the thread to go off on MP tangents. I have written at length about MP on another thread (which needs updating someday).
3. Market Delta is (now) fully integrated with Investor/RT. It is not possible to discuss one without the other. So the discussion will necessarily be product specific.
Right, we need to start with some fundamentals â get the concepts bolted down as it were. I stated in a previous thread MD is in its simplest form a tool for analysing T&S. This is not necessarily incorrect but on reflection it really doesnât do justice to the product. Hereâs a better description:
Market Delta is tool for measuring and analysing market activity in terms of itâs three dimensions - time, price and volume â utilising the bid/ask spread to infer something about the nature of each transaction.
What do I mean by this? MD assumes that trades that occur at the bid are a sell transaction (and buying at the offer obviously). The rationale being that the initiating party is motivated enough to pay the spread â ie: he/she really wants to buy/sell at that price at that time. Now is this a valid assumption? â this could be rather contentious. For the most part yes it works fine so the assumption ipso facto is valid â¦â¦.. but not always. Sometimes MD will show buying taking place but the market keeps heading lower. And letâs not lose sight of the fact that there are two parties to every transaction with potentially different time-frames, objectives and motivations. Weâll talk more about these important points in a later post.
So what do I actually use MD for?
1. Assess buying and selling pressure.
2. Determine support/resistance levels or potentials thereof.
3. Study trade facilitation.
4. Analyse the actions of big vs small traders.
5. Fine tuning entries/exits.
Iâll go through these in some detail later.
Now if you had asked me a year ago what I use T&S for I would probably have given you a similar list. However, I'm the first to admit I was never a really good tape reader - but now I am because I have right tool for the job.
My use of MD is fairly short term â typically 5 mins charts or less. I find MD of limited use over longer timeframes but Iâd be interested in other views on this point.
Thatâs it for now. In the next instalment Iâll talk about the various MD charts and indicators and how I have my workspace configured.
All the best,
bolter
