I thought I’d post one of my MtM Team posts from today on the blog at large. I only traded 6E today, but I did do some analysis of ES against cumulative delta. It’s one of the things I’m playing with lately. You can see in my post that I’m constantly nagging the team to post their own analysis, because that’s really the fastest way to learn. We still have a lot of lurkers, but I’m confident that I’ll eventually draw them out! :-)
If there are any more cumulative delta aficionados out there that would like to join the team and help us interpret it, that’d be a great contribution.
Anyway, here is the post I made….
Here is my 4-range from today with cumulative delta. You can see how late I woke up (I am a night owl!) by when the chart starts… hey, I still made some decent money today, so I’m not a total loss :-)
Anyway, here is how I interpret it so far today. It’d be cool if others also did this, so I’m not talking to myself. Cumulative delta lurkers, this means you! I know I beat this dead horse a ton but… you will learn so much faster by actually trying to do the analysis for yourself.
(click to enlarge… follow along with the numbers on the chart in the analysis below)
- Look at pt 1 for reference.
- Pt 2 is a higher high in price and delta, but the delta high is more dramatic. To me, this could be a warning that they are having trouble pushing price up. Not a reason to get short, but just a warning.
- At Pt 3 you can see that price made a higher low, while delta made a lower low. A sign you don’t want to be short yet, and if you are bullish you could even get long. Except, at Pt 2 we had a warning about the long side, so maybe best to stand aside.
- At Pt 4, we have a clear trade. Price had gone sideways before, with delta trending down. Now, this could mean 2 things:
- Price has hit support, and the sellers can’t break it
- Price has his support, and sellers are about to break it
So, all you know for sure is that price found some support. You wouldn’t fade it to the long side while delta is still pushing down. You could try to place a short trade near the top of the price range in anticipation of support breaking… But my preference is to wait for price and delta to tell you the answer. At Pt 4, price broke support, and delta pushed down hard. Looks like the sellers won, no?
Delta is the number of upticks minus the number of downticks? Is it volume weighted?
I made an indicator the other day that abstracts away all the up/dn ticks stuff… so we have methods for determining volume pressure based on bid/ask, up/dn, relative to previous median, etc. And, this is the cumulative look at that indicator’s output. I believe in this screenshot I had it set to bid vs. ask.
But, yeah, it’s just simple up pressure minus down pressure, however you measure it.
Hi Richard how to acquire your new cumulative delta indicator, I too am investigating delta volume.
Hi, though the one I made is only for the team, I didn’t invent cumulative delta and I’m sure there are other ninja indicators that will do something similar.