The MarketDelta Blog

I thought I’d share an approach to overlaying indicators that most of you probably didn’t realize was possible. I’ll also walk you through proper thinking during development of indicators that can keep you out of trouble and frustration to a minimum. This “thinking like a developer” applies equally to custom work as well as setting up standard indicators, because even the Standard edition of MarketDelta allows for so much customization.

The chart you see before you has three panes as follows: upper pane is a delta profile, the middle pane consists of two instances of the Volume Breakdown indicator, and so does the lower pane. When I say “instances”, that simply means I’ve added the indicator to the same pane more than once. This can often produce some very interesting possibilities, as we can see here.

Focus on the middle pane. The histogram with the wider bars (up green/down red) shows the delta for the total traded volume, per bar. The narrower bars (up blue/down orange) represents the delta for the large lot traders (you can filter for the large lots by using the “Consider Trades With Volume…..” setting in the middle of the VB indicator preferences). This is interesting and useful, but if we look at the lower pane, you’ll see the same two VBI’s, but now set to cumulative; and this is where it gets real interesting.

Note the two rough black circles. In the upper pane, we see price declining. In the bottom pane, we see a divergence between what the big lots are doing (on a cumulative basis) versus total trading activity. See how the big lots (blue) stay net delta positive all through the pull back, yet the net delta for all activity goes negative.

Much can be learned from setting up your own charts, so no chart definition will be included here. Instead, I’ll describe the simple steps to create an indicator like you see here. First, add a Volume Breakdown (VBI) indicator. From the preferences, set the “Draw As” to “Histogram, Solid(+/-) with green as up and red as down. Nothing new here yet.

Now, again, open the add indicators window (press Insert key on keyboard) and add a SECOND VBI to the same pane as the first. You can direct it to be added to a specific pane (instead of a new pane) by the drop down lists near the bottom left of the add indicator window.

Now, here’s the trick. In this VBI, for “Draw As:” select “Histogram, Custom(+/-)”. Now you can select the up and down colors as blue and orange, but note the little black triangle you can click on which lets you select the width of the histogram bars. In this case, I set it to 7.

The above explanation will build the middle pane. Building the lower pane is the same, except in the VBI preferences you will check the box for “Accumulate” and make sure it says “Days Values” next to it.

Enjoy!