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Market Delta by bolter
- Thread starter bolter
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William,
I wonder if the smaller traders are perhaps more responsive because the bigger traders are doing so many arbs and 'clouding' this level of detail. I dunno. I'll need to explore that some more on the stoxx50 today.
Thanks for the idea about consecutive bars. I'm not too familiar with the ES, is a volume chart of that size big or small? Are you mainly focusing on turns or smaller pullbacks.
One other method I was trying earlier this year was to focus on light prints on the tails when doing a false break. I was using price bars back then with settings of 4 or 5 depending on the market. More volatile markets had higher price bars. I'd enter on the close of the bar. I still do this method but wrap a bit more context around it these days. Divergent delta is used in this too.
Anyone else care to get specific? Everyone looks like they are just waiting for something, what for though - I am not sure.
MK
I wonder if the smaller traders are perhaps more responsive because the bigger traders are doing so many arbs and 'clouding' this level of detail. I dunno. I'll need to explore that some more on the stoxx50 today.
Thanks for the idea about consecutive bars. I'm not too familiar with the ES, is a volume chart of that size big or small? Are you mainly focusing on turns or smaller pullbacks.
One other method I was trying earlier this year was to focus on light prints on the tails when doing a false break. I was using price bars back then with settings of 4 or 5 depending on the market. More volatile markets had higher price bars. I'd enter on the close of the bar. I still do this method but wrap a bit more context around it these days. Divergent delta is used in this too.
Anyone else care to get specific? Everyone looks like they are just waiting for something, what for though - I am not sure.
MK
Quote from martys:
Hi MK,
Your stuff is great. I got the same feeling from reading the thread... I have to re-read for sure. But all I hear is divergence.
I am at work right now so can't confirm the parameters I played with. I have been looking at consecutive delta bars in the same direction for trend filter (detect trend change). This delta persistence idea might be a little filmsy right now like every other crap. I like to use Fib number for my time frame (yes I am a cult member) and volume chart to compare apples with apples. I "think" I used 6765 volume ES chart and look for 4 consective bullish or 4 consecutive bearish delta as a possible trigger. I also use a delta filter < 10 since I found the small guy is more responsive and better at times and then I would look for a delta bar in the same direction (current bar or later) with a filter > 9 (basically same as without filter) to pull the trigger.
This maybe just a mindless useless datamining exercise but anyone is welcome to try and input ideas. Please don't use real money.
Thanks,
William
MK,
You cannot use delta FOR entries. And similarly there is NO trigger to be found.
A footprint chart is an excellet tool for helping you fine tune (and by that I mean time) your entries and exits. Trading quick pullbacks in a trend is a great example. A 5min chart, a MA, a FP chart and a decent market and you have profitable strategy right there.
I would estimate that delta information on a FP chart has a half-life of about 1 minute, at best. So traders who look for a FP to tell them anything about the future market action are likely to be disappointed.Your obvious frustration, along with william's and others, are testimony to this fact. Gotta apply the right tools to the task at hand.
Let me ask you, if you took a 1 minute snapshot of T&S, and analysed it in detail - what could you infer about price direction and momentum in the next 1 sec, 10 secs, 1 min, 10 min, 1 hour? I think my half-life analogy holds up rather well. And 1 minute might actually be a little generous.
I would contend that if you're struggling to gain vaue from delta information it is because you don't actually have a trading system/method. A FP chart will not solve that problem for you. However, with a decent method in place you will immediately see the value of using delta. Focus your efforts accordingly.
That's my overly blunt view on the matter. Dissenting opinions will be welcomed.
All the best,
bolter
MK you know my views on this - but since nobody else is chiming in - I'll state them again in order to perhaps draw some debate.I would love to hear specifically about using the delta for entries. Where exactly is the trigger?
You cannot use delta FOR entries. And similarly there is NO trigger to be found.
A footprint chart is an excellet tool for helping you fine tune (and by that I mean time) your entries and exits. Trading quick pullbacks in a trend is a great example. A 5min chart, a MA, a FP chart and a decent market and you have profitable strategy right there.
I would estimate that delta information on a FP chart has a half-life of about 1 minute, at best. So traders who look for a FP to tell them anything about the future market action are likely to be disappointed.Your obvious frustration, along with william's and others, are testimony to this fact. Gotta apply the right tools to the task at hand.
Let me ask you, if you took a 1 minute snapshot of T&S, and analysed it in detail - what could you infer about price direction and momentum in the next 1 sec, 10 secs, 1 min, 10 min, 1 hour? I think my half-life analogy holds up rather well. And 1 minute might actually be a little generous.
I would contend that if you're struggling to gain vaue from delta information it is because you don't actually have a trading system/method. A FP chart will not solve that problem for you. However, with a decent method in place you will immediately see the value of using delta. Focus your efforts accordingly.
That's my overly blunt view on the matter. Dissenting opinions will be welcomed.
All the best,
bolter
Here's my thoughts on MD divergnces ....
There is problem inferring divergences on a time series of discrete values that is not smoothed/averaged in some fashion - IMHO. Traditional volume divergences are a great example of this. However, the VB has a far greater dispersion of values (including negative) so the problem is even greater than with volume.
If you study alot of these MD divergences (aka "delta shifts") on the various charts posted on ET you'll see my point. The posters have been quite selective about what constitutes a divergence and indeed how many divergences are required for a "signal". 5Pillars technique was quite interesting but I notice he seems to have abandoned it. The other problem with his charts was that he used short-term regression channels which are notoriously over-fitted and present a distorted view of history. (No offence 5P).
In short, is there value in MD divergences? Absolutely - they provide some important clues (see my earlier post about raw volume vs delta). Can you trade from them in isolation - only if you aspire to reduce your account balance expeditiously.
Now, I fully expect people to take me to task on this view. Can someone demonstrate that I am mistaken?
Bon chance,
bolter
There is problem inferring divergences on a time series of discrete values that is not smoothed/averaged in some fashion - IMHO. Traditional volume divergences are a great example of this. However, the VB has a far greater dispersion of values (including negative) so the problem is even greater than with volume.
If you study alot of these MD divergences (aka "delta shifts") on the various charts posted on ET you'll see my point. The posters have been quite selective about what constitutes a divergence and indeed how many divergences are required for a "signal". 5Pillars technique was quite interesting but I notice he seems to have abandoned it. The other problem with his charts was that he used short-term regression channels which are notoriously over-fitted and present a distorted view of history. (No offence 5P).
In short, is there value in MD divergences? Absolutely - they provide some important clues (see my earlier post about raw volume vs delta). Can you trade from them in isolation - only if you aspire to reduce your account balance expeditiously.
Now, I fully expect people to take me to task on this view. Can someone demonstrate that I am mistaken?
Bon chance,
bolter
Quote from bolter:
Can someone demonstrate that I am mistaken?
bolter
I think you are completely correct. The point about smoothing is significant. IMHO the behavior of the order book is one of the best indicators of the significance or otherwise of a MD divergence. I have posted charts before on this so I won't clutter up this thread with another one.
Here comes another flogging.
You can only extract so much out of MD, MP and TA for that matter ... they are all derivatives of price and volume and open interest.
Price being the only tradeable.
Be careful how you spend your time and make certain that you are watching the price and not farting around trying to write clever code when you should be watching the price.
If the price is going up and the delta sum is steadily increasing then the instrument that you are watching has a tendency to the long side.
ie If ES delta has risen 15K in the last 'n' strikes then the collective palate of all the traders is to the long side.
Now!
If you are watching the price and not some fancy arsed indicator, you will see that the price is moving unevenly.
It will rush through several tics and then stall while the traders throw everything that they have at it ... both on the ask and on the bid.
Here is the clever part!
If you sell into it, remember that the delta is standing at +15K and eventually this will need to be washed out for the collective trading palate to turn short.
This does not mean that you should not sell into the ES at this point, but do not expect it to drop down 3-4 handles, in fact this is a good time for a points target.
If on the other hand you want to buy into the ES, then terrific but remember if indeed this is the next direction that it takes (in other words, you got it right) you might be so far back in the queue that even your own mother will not recognize you.
Quickly, you ( or your account balance) will come to realise that you are not always filled when you pick the right side correctly and you are always being filled when you get it wrong. This will skew the results of your sim traded system and bring a tear to your eye.
Now, the next next new new thing in TA may be standing on your head while reading an %R ... I do not know.
What I do know is that Bolter is dead right .... unless you have a strategy for trading the price IN the market, you will be dog tucker.
So! what have I just said.
Watch the price, watch the price, watch the price ... make certain that 80%+ of your time is spent watching the price.
Trading is not as technical as you may think ... but it does require rat cunning.
You can only extract so much out of MD, MP and TA for that matter ... they are all derivatives of price and volume and open interest.
Price being the only tradeable.
Be careful how you spend your time and make certain that you are watching the price and not farting around trying to write clever code when you should be watching the price.
If the price is going up and the delta sum is steadily increasing then the instrument that you are watching has a tendency to the long side.
ie If ES delta has risen 15K in the last 'n' strikes then the collective palate of all the traders is to the long side.
Now!
If you are watching the price and not some fancy arsed indicator, you will see that the price is moving unevenly.
It will rush through several tics and then stall while the traders throw everything that they have at it ... both on the ask and on the bid.
Here is the clever part!
If you sell into it, remember that the delta is standing at +15K and eventually this will need to be washed out for the collective trading palate to turn short.
This does not mean that you should not sell into the ES at this point, but do not expect it to drop down 3-4 handles, in fact this is a good time for a points target.
If on the other hand you want to buy into the ES, then terrific but remember if indeed this is the next direction that it takes (in other words, you got it right) you might be so far back in the queue that even your own mother will not recognize you.
Quickly, you ( or your account balance) will come to realise that you are not always filled when you pick the right side correctly and you are always being filled when you get it wrong. This will skew the results of your sim traded system and bring a tear to your eye.
Now, the next next new new thing in TA may be standing on your head while reading an %R ... I do not know.
What I do know is that Bolter is dead right .... unless you have a strategy for trading the price IN the market, you will be dog tucker.
So! what have I just said.
Watch the price, watch the price, watch the price ... make certain that 80%+ of your time is spent watching the price.
Trading is not as technical as you may think ... but it does require rat cunning.
Bolter - No....I am still using the exact same set-up as I always have....no changes.
The Linear Regression channels on my charts are more of a visual reference to keep the short term trend in mind.....not a means necessarily to pick entry locations.
http://www.elitetrader.com/vb/showthread.php?s=&threadid=80753&perpage=6&pagenumber=3
The Linear Regression channels on my charts are more of a visual reference to keep the short term trend in mind.....not a means necessarily to pick entry locations.
http://www.elitetrader.com/vb/showthread.php?s=&threadid=80753&perpage=6&pagenumber=3
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