Volume Delta

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kyamato

Hi,

Been doing a lot of reading and searching but having a hard time finding a basic answer to some questions about market delta in general and was hoping someone could give me some insight.


1. I am trying to understand the "logic" or the "story" of how there can be a Divergence within a bar Delta or the days cumulative Delta. If there are more sellers lets say (which is a negative delta) why would price be going up?

2. I know the market theory that for every buyer there needs to be a seller, but when looking at delta how can you have say 200 contract bought at 15.00 but 0 sold at 14.99. Where exactly did the buyer buy from?

Hope its not too basic a question but trying to get a more laymen answer.

thanks
 
Limit orders.
In the case of heavy selling and price not moving or even moving up the limit buyers are absorbing the market sells.

In your other case the 200 sold to buyers came from a limit offer of 200 (or more) at 15.00
 
As I understand it delta looks at market orders, but doesnt a limit order turn into a market order when it goes through or does volume delta only count orders executed as mkt?
 
The bids and asks are posted, and then another trader hits them, or posts their own. The answer to your question is probably best imagined by ignoring whether a trade happened or not and focusing on the bids and asks. If there is a bid, and the ask price is at the bid or better, then there is a trade. If there is an ask, and the bid price is at the ask or better, then there is a trade. Otherwise the bid or ask is posted in the book's depth and becomes yet another bid or ask.

Market orders are a distinct order type, but you can also just think of them as someone hitting whatever the best bid or ask price with a limit order in order to execute immediately instead of posting their own bid or ask into the book to get a better price.
 
Last edited:
kyamato said:
Hi,

Been doing a lot of reading and searching but having a hard time finding a basic answer to some questions about market delta in general and was hoping someone could give me some insight.


1. I am trying to understand the "logic" or the "story" of how there can be a Divergence within a bar Delta or the days cumulative Delta. If there are more sellers lets say (which is a negative delta) why would price be going up?

2. I know the market theory that for every buyer there needs to be a seller, but when looking at delta how can you have say 200 contract bought at 15.00 but 0 sold at 14.99. Where exactly did the buyer buy from?

Hope its not too basic a question but trying to get a more laymen answer.

thanks
More...

Kyamato,

In your example,
15.00 is the ASK (sellers)
14.99 Is the BID (buyers)

200 contracts traded at the ASK (Buyers bought 200 contracts from the sellers)

Volume Profile uses the term Delta to refer to the difference of trades at the Ask vs trades at the Bid. (Trades at Ask - Trades at Bid)

A Price Delta divergence is when a candle/bar closes higher than it opened but there were more trades at the Bid in that candle/bar.

They
 
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