The MarketDelta Blog

We are often asked about one of our commercial indicators, the Delta Divergence signal. As the markets have been particularly active the last few weeks, it is a good opportunity to see how order flow analysis has worked in this environment.

Delta Divergence is based on a simple concept: If prices move out to new extremes of the session, but order flow moves in the opposite direction, this means actual trading activity favors a reversal.

Because the Delta Divergence signals are specifically seeking tops and bottoms in the market, they are rotational indicators by nature. This means that during strong trending periods, they have a potential for failure. But trends occur much less than half the time, and even during multiple-day directional moves, there are often strong rotational moments within the intraday timeframe.

The last couple of days, the markets have indeed rotated up and down, with strong moves in both directions. This “sideways” motion is the most common form of market activity (though usually the ranges are smaller), and it is an ideal setting for studying the Delta Divergence indicator. Click here for a screenshot of today and Friday’s 24 hour sessions, marked with Buy and Sell signals of the Delta Divergence indicator. As you can see, all five signals over the 2 days were profitable, and despite the volatility, the highs of both days were accurately captured by these signals.

While the Delta Divergence indicator may not on its own dramatically improve your trading, many traders depend on it as an extra source of confidence when making decisions. Not all signals are successful, and it is up to the individual trader to decide how to best implement the Delta Divergence within a trading style.

The Delta Divergence indicator requires the Professional version or higher of MarketDelta.