Market Delta by bolter

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I have spent hours enjoying Bolter's MP and MarketDelta threads as a lurker. Now let's see if I can
step up contribute something to the the group :)

I don't have MarketDelta, but I do use a program called Neoticker, that has some unusual features
that allow the user to create some MD-like analytics.

Neoticker's low-level data collection routine parses the Time and Sales inputs for each ticker symbol
being collected and creates additional fields to accompany the standard OHLCV fields. Two of these
special fields are BidTradeVolume and AskTradeVolume, which are the volume of each trade, flagged
for being executed at Bid or Ask.

This BidTradeVol and AskTradeVol information can be accessed with a programming language, and
formulas can be written for indicators that will calculate and manipulate the bid-ask delta for each
symbol down to the single tick level, if you need to get that granular.

I created an indicator that I believed should behave similar to the MarketDelta VB indicator when
VB is set to accumulate.

It is the the cumulative sum of the bid-ask volume for each trade with volume greater than or equal to
100.

Like others on this thread, I felt that this approach would allow me to see the bias of the market-moving
+100 lot traders, and might give me a usable edge. Sadly, I have been disappointed in my results with
this indicator thus far. Which brings me to the point of my post:

I have found the bid-ask delta for the +100 lot trader to be an unreliable and often
misleading indicator of subsequent short-term price action in the ES contract.

However, on this thread, I see a group of knowledgeable and capable traders who seem to be making
profitable use of the exact same information that is confusing and frustrating me. So I would like to ask
for your help, should you be willing.

I would like to post a sample of my Neoticker delta workspace and see if we can compare it to the
MD VB accumulator, and try to discover if my Neoticker analytics are faulty.

Or, perhaps my analytics are sound and I am misinterpreting what I am looking at.

Or, perhaps I am expecting too much from the +100 lot traders in terms of their accuracy in foreshadowing
ES short-term turning points.

Thank you for allowing me to ramble on. I will point out specific areas of question in the Neoticker graph in
a subsequent post.

Any thoughts or comments most welcome.
 

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Okay, here are some specific questions/observations on my Neoticker chart from the prior post:

1) There is an overall downward drift in the delta plot during the entire 8:00 AM to 1:00 PM Pacific time frame covered by the chart.

To me, this indicates overall net selling pressure from the +100 lot traders over that time frame. Does the MD VB indicator show a similar downward bias during the same time period?

Notice that the apparent overall selling bias seems to continue even after the low of the day is in at 10:00 AM and the price action picks up a sideways-to-up tone.

2) From 8:12 to 8:15 AM, the big trades start to incorrectly buy into the falling price action before reversing at 8:16 AM. Are others seeing this type of misdirected trading by big traders around price inflection points?

3) From 9:52 to 10:00 AM, the big traders pretty much nail the price breakdown to the low of the day, right on the money.

4) From 10:01 to 10:23, big traders do not participate in the rally back from the low of the day

5) From 11:14 to 11:31 AM, they sell into the entire move up from 136700 to 137075

6) From 12:20 to 12:32, the big guys fade the sidways-to-up biased price action.

Are the rest of you seeing these discrepancies? Am I expecting too much accuracy in trading direction from these big traders, who, after all, are mere mortals like you and me?

I am not trying to criticize or challenge the usefulness or validity of the delta info. Just trying to verify the accuracy of my Neoticker analytics and establish best practices for interpreting the delta accumulator on short timeframe charts. Thanks.
 
mikesch,

I would have to agree with you about size filtering not being a reliable predictor of short-term ES price moves. I do use a 49+ size filter. Filtering size requires a lot of interpretation.

Recently I stopped using a filter size on my MD footprint charts, and started filtering on a T&S strip.

I wrote in another post about how large traders may use a combo of bids and offers. For example, a trader wishing to get long 1,000 contracts may employ several strategies including: chopping the trade up into smaller lots, and using a combo of market orders at ask and limit orders at bid. To someone watching a footprint chart it would be nearly impossible to spot.

And of at least equal importance is the intention of this 1,000 lot trader trying to get long. Are they covering a short position with no new buying? Is it a mutual fund or other institution trying to hedge another position they have with a different instrument? Is it a local in the pit of the big S&P contract who got stuck long or short and is trying to get out by using Globex and the emini so the other locals don’t see him squirm and take advantage of him?

When I transitioned from trading stocks to futures (mostly ES) I was initially discouraged because the ES seemed to move in random swings and unable to hold a trend very long at all. I thought I was leaving the market maker games behind, but it seemed like the ES was full of game playing as well. There are games played (strategies mentioned above) in index futures and I believe that such games at least in part can explain why the ES behaves the way it does.

As I learned more about what a futures contract really is and who trades it, along with learning market profile I’ve had better success. For instance, market profile tells me when it seems to be mostly locals pushing price back and forth which suggests further price rotation as opposed to direction/trend.

I hope this is helpful.
 
ticktrade

Thanks for the VB chart for 11/3, very helpful.

The VB accumulator in your chart moves in a vastly more logical relationship to price than my Neoticker indicator.

I used your chart to compare to my Neoticker workspace, and concluded that there was something wrong with the way Neoticker was handling the bid/ask flagging of the individual trades.

I confirmed this by auditing the Neoticker TS versus my QCharts datafeed TS, and found that the QC feed had flagged the trades correctly, while the NT TS had numerous errors and discrepancies.

Thus, I can chalk most of my questions about the divergences between the ES price action and the big trader delta up to inaccuracies in my analytics.

This is what they call progress. :)
 
xxxskier

Yes, you make some excellent points.

I may be expecting too much from the big trader delta figures
in terms of anticipating short term turning points.

I have assumed that the most useful information would be the points where delta shifts from negative to positive or vice versa.
I thought that price would almost certainly follow the change in direction of the delta.

Maybe this assumption is faulty. You point out some good reasons why my thinking may be too simplistic.

Someone else (perhaps Fearless) has posted their observation that there is good, tradable information at the points where there is little or no +100 lot activity, rather than at the delta shift points.

Perhaps the moves from the low activity periods are the more robust and reliable.
 
mikesch,

I also initially thought the delta shifts would be good predictors, but they will get you chopped to pieces, I know because I tried it when I first subscribed to MD.

Orienting my thinking around market profile concepts is very complementary to the use of MD. In James Dalton's primer on MP he suggests the trader should be constantly asking the following two questions (most people stop after the first question) 1) which way is the market trying to go? and 2) is the market doing a good job in its attempt to get there?

To answer question #2 requires some analysis of volume and value area. If you have Dalton's book check out page 192, he has a nice table showing all the permutations of high volume, low volume, unchanged volume, higher value area, lower value area, and unchanged value area and matches these permutations with anticipated directional performance. For example, higher volume with higher value area indicates very strong continuation, but unchanged volume with higher value suggests a market that is slowing down and balancing. Also understanding the MP concepts of initiative versus responsive buying/selling in conjunction with delta analysis is very helpful.

I'll stop here because this is a MD strategy thread, not a market profile thread.....
 
hi mikesch,
I may be expecting too much from the big trader delta figures
in terms of anticipating short term turning points.
More...
In my experience it is coincidental with price - not leading and (importantly) not lagging. Hence it has not anticpatory properties. I have found that the best heads-up that a truning point maybe in the making is when this indicator goes sideways for a few bars. But only gradual turns cooperate in this fashion.

Here's my chart for Friday (using a 25 lot filter). I've described how I arrived at 25 in an earlier post. The real value of this indicator is in determining if the big guys are participating in a move and to what extent. Divergences with price are the obvious clues. They don't happen all that often in the ES so they should get your attention.

bolter

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Quote from mikesch:


...edit...

I used your chart to compare to my Neoticker workspace, and concluded that there was something wrong with the way Neoticker was handling the bid/ask flagging of the individual trades.

This is what they call progress. :)
More...

Mike'

that is a lot of work you did to code and set that up...

that is disturbing that NeoTicker is inaccurate for what you wanted to pull and plot by code...

are you going to confront the Neoticker staff or assume everything else is accurate or inaccurate as far as coded development indicators with NT in the future... ?

i use and code in NeoTicker also...

cj...

:(



HAVE STOP <img src=http://www.enflow.com/p.gif> WILL TRADE
 
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