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50 Day Moving Average Pierced by IndexesDuring today’s trading many of the U.S. Stock indexes pierced their 50 day moving averages and set off a wave of selling triggered by resting sell stops and probably some HFT’s that we taking advantage of some weakness. Out of curiosity, I wanted to see what our Heat Map iPad app was showing. There is a very handy map type called 50 day average. It shows how all the components in the index you are viewing are trading in relation to their 50 day average. It becomes immediately clear which stocks have been showing strength recently and which ones have been showing weakness. As of lunch time in the U.S., here are is the DJIA, Nasdaq 100, and S&P 500 components and how they compare against their 50 day average. DJIA
Nasdaq 100
S&P 500
What is difference between VPOC and POC?VPOC is the Volume Point of Control (volume based) POC is the Point of Control (time based) The VPOC relates to volume and POC relates to time. Both represent where the most trading occurred. VPOC is where the most volume occurred for the specified session or time frame. POC is the price at which trading spent the most time at. Very often people confuse time with volume and think that the price the market traded at the longest would have the most volume, but this is a misconception. Especially when looking at 24 hour charts, the POC does not necessary mean the highest volume price. If only viewing the day session, many times the POC and VPOC are very close or the same, but not always. Which is more important? – That is up to you. Some traders prefer the VPOC because it is more exact when inferring how much interest a particular price was for traders, both buyers and sellers. If you use Market Profile, it often references the POC. Our software, MarketDelta, can use both the VPOC or POC when viewing a Market Profile chart. If you visit www.marketdelta.com and search VPOC at top search box, you will get all sorts of good informtion. The Market Profile add on is required in order to plot the POC and VPOC. If you have any questions please comment or contact us. How to Plot the Developing VPOCThere is new piece of functionality in 10.5 that could easily be overlooked, but it is an important improvement for those who rely on the VPOC (Volume Point of Control) as a reference point. The new functionality allows for the plotting of the developing VPOC. The developing VPOC plots a line and shows the history and progression of how the VPOC has adjusted based on price and volume activity. Think of it as the history of where the high volume price has been over time. To add this to a chart first add a Profile indicator to a chart. Once added, make sure the top most setting in its preferences is set to “Price and Volume”. Then just check off the “Dev VPOC” box to add it to the chart. This will plot based upon what is set in the Time Per Profile section in the preferences. In the screenshot below it was set to 2 days, meaning the developing VPOC is plotted for the past 2 days.
24 hr Support Now AvailableOn January 3rd we rolled out 24hr email support so that our overseas customers and all you midnight traders will have someone to reach out to should it be required. This is to complement our already 24 hour support ticketing system which you can log tickets or review past inquiries. We are proud to be able to offer this service to MarketDelta clients and it only underscores our commitment to you and your success as a trader. While most companies are finding ways to scale back on support we are committed to finding more opportunities for you to stay in touch with us and contact us when required. All this comes on top of our live chat support before and during U.S. market hours. This allows us to provide real time support to the bulk of our customers and offer same day resolution to issues via email. Another reason for expanding our support has to do with MarketDelta Trader, our new trading software. In the next few months there will be some big enhancements that will integrate it with MarketDelta Charts, allowing for a fully integrated trading solution. As a trader myself for many years, I know it is important to be able to get help when you need it most and you can rest assured we are standing by to help make you as successful as we possibly can through software AND support services. 10.5 Version HighlightsToday 10.5 was released and is available for download by visiting www.marketdelta.com/downloads. A comprehensive list of what’s new in this release can be found in our Support Portal under MarketDelta Charts Announcements. Here is a short list of a few that everyone should know about as it might effect how you do certain functions within the software.
Importance of “Fresh Start” for Non-time based chartsA lot of MarketDelta customers use non-time based periodicities (chart intervals) while viewing charts. There is an option on the periodicity menu call Fresh Start that applies to non-time based intervals and is very important to understand if using custom indicators or studies, such as our Delta Divergence indicator.
When Fresh Start is checked off the interval settings you have selected begin fresh for the day and do not carry over from the prior day. For instance, if the chart is set to 1440 tick, when the new day begins the chart begins building a new 1440 tick bar. If Fresh Start is not checked, the last bar from the prior day will keep building. For markets that gap this creates one large bar and as seen below, can really skew the signals produced by a custom indicator or signal marker. 
Bottom line, when fresh start was checked more signals where generated. For this specific chart, it was important because it references the low and high of the day. More information about periodicities and fresh start are available here. Our Most Popular Blog Posts of 2011As the year winds down, we were looking over what you thought to be the most interesting blog posts of 2011. We also wanted to include one from late 2010 that had lots of traffic and lots of comments. Most Visited Blog Post of 2011 Most Commented Blog Post of 2011 Winner for 2010 Forex Buy/Sell Signals with Delta DivergenceDelta Divergence is our commercial signal package for automatically generating buy and sell signals on charts using our order flow analysis tools. The signals are good in rotational markets as they seek to identify reversals when order flow moves opposite price direction, suggesting an imminent turn-around in prices. Traditionally, the Delta Divergence signals use Ask and Bid volume to measure the sentiment of market-priced trades. The Forex market is many times larger than the equities and futures markets – combined. Spot Forex remains one of the largest markets in the world and is particularly popular with short-term traders and scalpers. However, as this is a de-centralized market with no true “exchange”, there is no true and accurate volume information available. So, how can you use Delta Divergence on a market like Forex, if you don’t know Ask and Bid volume information? We provide the features to set our order flow studies based on “up tick” and “down tick” so you can compare the price ticks in a positive direction with those in a negative direction. This is a form of order flow analysis, but does not use the actual contract size of those individual trades and ticks. What are the results? Here is an example from this week on the EUR/USD spot forex instrument:
Click for a larger view.
Step Through of a Trade SetupEarlier today we tweeted out that “cumulative delta is deteriorating..”. This was based upon the fact that cumulative delta was putting in new lows for the day while price was not. Many times we see cumulative delta lead price. Either way, when cumulative delta is making a push and price isn’t, something is going to happen, its just a matter of time.
Why? Well either price will follow cumulative delta and the aggressive order flow will prove to have been correct OR the shorts (as was the case when we tweeted) are getting sucked in at the low of the rotation and will fuel an often quick move in the opposite direction. Now for a very important observation that is extremely valuable when you see it. Today’s price action up to the time we tweeted was tight and range bound. Just a very well defined 8 point rotation. This lends to more rotation inside the well defined range UNTIL proven wrong. The delta was deteriorating but at a very well defined support. So, the trade opportunity is actually a long at this support level with a tight stop. The tight stop is suggested because if price does start to breakout it should be accompanied by some follow through and range extension. See the Footprint chart of this example below.
If this deteriorating cumulative delta pattern were to occur on a day that was not tightly range bound, then a breakout would be more likely versus a snap back from the well defined support level. Market Profile for StocksMarket Profile charts are famous in the futures industry, as that is where they were born and remain essential tools for many futures traders. A question we often receive is: “Can you use Market Profile for stocks?” It is important to understand that Market Profile is nothing more than a way of viewing financial auctions. In this regard, there is no difference between futures, options, stocks, bonds, commodities or other financial instruments: they all follow the same basic auction process. Thus, Market Profile is perfect for understanding where the value areas are in any particular market, whether it is the ES future or the stock of Apple. Here are a couple examples. First, when setting up a Market Profile chart, it is a good idea to change the price range of each letter. A stock trades in pennies and may sway by many dollars a day. Depending on the stock, 1 dollar may represent a small part of its range, while for others it is a large part of its range. You will probably want to find a letter size between 10 cents and 1 dollar, which you can do in the Custom Letter Range box:
Enter 0.1 or 1 or whatever you feel is appropriate. Here are some examples of AAPL stock using a Market Profile set to 10-cent letter ranges.
Here is a classic example of Market Profile value areas in action. The market broke above value, and then rejected efforts to fall back inside that value. This confirmed that new value was successfully established. Here is another one:
The market falls and trades below value for an entire day. On the following day, the market attempts to push back up in to this prior value, but the value area low stops it cold. Market Profile charting is an extraordinarily powerful tool, and we recommend that anyone serious about it give those charts a try. You can learn a lot about Market Profile concepts, theories and strategies in the books by James Dalton, Markets in Profile and Mind Over Markets. |
