Market Delta strategies

Quote from xxxskier:

Market delta is a great tool, but imo you can't really use for it signals unless you are okay with 1 - 2 points avg win on ES.

I do use it to watch order flow, in fact I don't watch T&S much anymore because I like the MD footprint chart better. I use a size filter MD footprint alongside a MD footprint with no size filter to compare the retail players versus the big players. Fading retail is quite profitable.

One caveat though is the MD premise itself, which says that it is the large aggressive traders that move price and that buyers and sellers are going to market, not sitting in the que with limit orders. The MD assumption is that ask traded volume is always buying and bid traded volume is always selling. However, there are big players who don't go to market, but sit in the que; and some of the biggest players use a combo of hitting and sitting. Hitters vs. sitters - understanding their different motivations and subsequent behavior is the key.
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I agree, this is part of an art with the tool...

Kind regards,
MK
 
Thanks everyone for participating in this thread, I see alot of enthuism here.

I hope we can all enhance our strategies using our discussion here.

To continue my post:

lets examine how we can benefit from market delta, I do believe that market delta alone is deceiving because as I said in my first post and as others said too that seeing a negative market delta doesn't necessary means there is an aggressive seller.

I do combine both the market delta and the price action to come up with meaningful conclusion.

1- If we have normal increasing market delta and normal increasing price, this is the common case, aggressive buyers lift out the ask levels so the price goes up

2- if we have normal increasing market delta and constant or decreasing price, here we start to kick in, as simply this means that buyers are trying to lift the ask level but there is huge resistance, so the price is almost constant while the delta is increasing, and even worse if we see the ask stepping down

3- if we have "rapid" increasing in market delta and increasing price, this usually means aggressive buyers facing no resistance.

Notes:

1- the above argument goes in the other way around for selling

2- what do I mean by normal increasing of market delta ? ok, for every stock there is an average number of shares needed to break a bid or an ask level, say for example AAPL is quoted $77.56x$77.57 , you watch for the number of shares hitting the ask and bid and record down these numbers , so lets say the total number of shares traded @ the ask was 1500 then we get quoted $77.57x$77.58, we do the previous process again and watch for broken level (bid or ask), lets say we do this 50 times (50 level breaks) and take the average of these readings, now we have the average number of shares need to break a bid or an ask level, my system is fully automated so this is done easily but if you are manually trading then you can't do it this way, you will use your feeling for the stock, I am sure if you look at AAPL and QQQQ you will notice the difference.
So by normal increasing of delta I mean that the price is increasing in the same rate that delta is increasing, so if price increase 5 cents then we expect that delta increases 5 x The Average delta calculated above
 
Continued.....

So lets develop a simple strategy using the above.

I call this "The wall resistance"

we watch for a stock like AAPL and calculate the average number of shares needed to break a level, then we watch for the price action and wait till we see at a certain level that the market delta is increasing or decreasing while the price is constant or or going on the opposite direction of the delta, this means there is a wall resistance in the direction of the delta and if the wall stands still, we normally see a rally in the opposite direction, why this happens ?

For example, if we see this wall at the ask, traders keep on hitting it, if it doesn't break after a while then normally other traders will believe that there is a resistance here and will go in the direction of the wall so this puts some pressure on the downside besides all the traders who hit that wall will discover that they are being trapped and will run to sell all the shares that they bought which will usually create a rally to the downside, how much this rally will go ? for a stock like AAPL its normally not less than 10 cents but usually if that wall was really legit you will not see the price to go back for some long while, so you can get 30 or even 50 cents within few minutes.

ok, what if the the wall breaks ? normally you will see a rally in the opposite direction of the wall, so in the above example, if the ask level is fully taken for more than 2 cents then just reverse your position, the logic behind this the exact opposite of the above.


so with this strategy you can get some high probability trades with nice scalp profits.

I am sure that some of the above might sound vague or not clear so please just throw in your questions and/or your criticism

please excuse my bad English.
 
Quote from dcraig:

5,

You are using True Strength Index because of it's low lag ?
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This indicator constructs a more precise review of the current candlestick and all those prior imo. It does a better job as a visual reference in chop and strong trends, as compared to the MACD, stochastics, RSI, and others for the entry set-ups I am looking for. I never enter a trade because of the TSI or as a signal by itself....it is used more as a price related visual reference to optimize potential entry locations.
 
Sorry, made a mistake in my example. The example should be as below :

Also, I've given an example below where the shift in delta would not work.
Say for example, the important support level is at $50
1 minute chart
Time Delta Price
10.57-10.58am -20 $50.2
10.58-10.59am -50 $50.15
10.59-11am -300 $50
11-11.01 am +400 $50.02
11.01-11.02 +50 $50.05
11.02-11.03 -300 $50.1
11.02-11.04 -50 $50.15
11.04-11.05 +100 $50.05
11.05-11.06 -70 $50
11.06-11.07 +200 $49.8
11.07-11.08 +50 $49.75

From the example, if just using delta and important support level, one will go long at 11.01am as price has gone above $50 and there is a shift from -ve delta to +ve delta. But as you can see, it did not really yield any real profits.
This is just an example of what I see from my experience.


Quote from billp:

5pillars,

I hope you don't mind sharing your knowledge on delta. Not trying to put down anybody or any strategy, just sharing some of my experience here in order to get some help. Thanks.

Simplified example. You have mentioned about the shifts in delta (eg from -ve delta to +ve delta) many times in other threads for you to take the long side. (of couse usually coupled with certain important levels such as MP levels and TSI, divergence)


Shifts from +ve delta to -ve delta and back to +ve delta from 1 period to the next is pretty common and certainly not necessary for it to occur at important levels only. It can be +ve delta for 1 period followed by -ve delta in the next period or the +ve/-ve delta can last for several periods at a time etc. One can see this from 1 minute to any number of minutes charts. Same goes if one is using tick charts (eg: 317 tick charts etc). Thus, just seeing the delta shift is insufficient IMHO.

Of course, one can add that, let's look at certain levels such as market profile levels etc, then from there look at the shift in delta.
For me, although I did not try that with market profile levels specifically as I was not subscribed to it at that time, I can still pick up significant support/resistance levels. Thus, I can 'test' these levels with the shift in delta. IMHO, the shifts in delta (eg: from -ve to +ve at important support levels that hold and which cause price to move up) does not necessarily ring true. As xxxskier has mentioned in his last paragraph, the big players can engage in being hitters or sitters or both. Usually in my experience, they will engage in both. Although, yes for the support to hold and price to move up, there will need to be some aggressive trades at the ask without a doubt, but whether that will always cause a shift in delta from -ve to +ve, I doubt it. I've seen at times(not rarely) where price rise up a fair amount and quickly on -ve delta.

Also, I've given an example below where the shift in delta would not work.
Say for example, the important support level is at $50
1 minute chart
Time Delta Price
10.58-10.59 -50 $49.9
10.59-11am -300 $49.95
11-11.01 am +400 $50.02
11.01-11.02 +50 $50.05
11.02-11.03 -300 $50.1
11.02-11.04 -50 $50.15
11.04-11.05 +100 $50.05
11.05-11.06 -70 $50
11.06-11.07 +200 $49.8
11.07-11.08 +50 $49.75

From the example, if just using delta and important support level, one will go long at 11.01am as price has gone above $50 and there is a shift from -ve delta to +ve delta. But as you can see, it did not really yield any real profits.
This is just an example of what I see from my experience.

IMHO, if one were to use this strategy of looking at shifts in delta at important levels, my feeling is that its more of an art rather than 'a simple strategy' that it is made up to be. Its just like level II, one cannot simply say that if there are more offers sitting at the bid side, then there are more passive buyers or if one were to assume that they are fake, then there are actually more sellers. Its not that simple!

Maybe you can share your experience on how you master this 'art'. Thanks. I've spent a fair bit of time on this and loath the idea of not getting anything out of this delta.
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Quote from billp:

5pillars,

I hope you don't mind sharing your knowledge on delta. Not trying to put down anybody or any strategy, just sharing some of my experience here in order to get some help. Thanks.
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The "shifts" in delta is my FINAL criteria that must be met after all other conditions are proper to enter a trade. There is a process to find a high probability trade entry imo...

1) Is price at or near a s/r level based on recent price action or a MP level.

2) Do I have the delta in a divergence configuration during the most recent candles.

3) Does the TSI confirm possible "price" based optimal entry location.

4) Do I have the delta shift required for entry.

The SHIFT by itself is not the signal to enter a trade..........it is just the final step in a trade entry based set of criteria. The SHIFT transition is a requirement, to enter the trade with momentum at that moment most optimal after all other criteria are in alignment.
 
Quote from potemkinvillage:

5P,

Can you please comment whether my understanding of your Delta Shift concept is correct?
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Again the SHIFT is not something to fixate on.....it is not a stand alone entry method. The SHIFT is the final requirement for trade entry to have an environment of momentum as the trade is initially filled.

Also, my footprint charts are set at "4P" not at 317 tick.....it is my candlestick charts that are set to 317 tick. :) You may also want to set your TOTAL bar volume a different color than red.......like this example.........

http://www.charthub.com/images/2006/10/05/ESZ6_MD.png

My total per bar volume is set in a blue color......this way it is differentiated from the coloring of red for negative and green for positive....just an idea.
 
Quote from 5Pillars:

2) Do I have the delta in a divergence configuration during the most recent candles.
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5Pillars,
Can you elaborate on this one please, what is a divergence configuration ?
 
Sure...........see the divergence of the delta prior to my entry.......

http://www.charthub.com/images/2006/10/04/ES_317_VB_2.png

You can visually see the delta was in a diminishing state of selling spikes with conviction, just prior to the shift for my entry. Price made a lower low, but the initiated sellers were of less conviction as the ES traded at the LOD.........this is a divergence of price and in this case "negative" delta.

You can also see that price was at the lower channel of my Linear Regression channel, and there was some moderate support potential in the 1340 to 1341 area from the market profile chart.........

http://www.charthub.com/images/2006/10/04/MP_2.png

All of this combined told me this was an optimal location in price to enter a trade from a delta divergence with shift.
 
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