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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. 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. Iceberg OrdersWith the availability now of our new trading software called MarketDelta Trader, iceberg orders are much more obvious. This is because the new software combines depth of market (DOM) data with a tightly integrated Footprint. This combination of the pre-trade data with post trade data shows iceberg orders more clearly. For those who do not know much about iceberg orders, the simplest way to describe them is to simply think of a real iceberg. Only a portion of the quantity is shown in the depth of market. As the order is filled, more quantity is automatically refreshed in the order book. A simple example would be an order for 500 contracts. The trader uses an iceberg order to only show a set quantity, say 50. As the 50 are filled, another 50 are automatically, and almost instantaneously, sent into the market at the same price. This will continue to happen until the entire iceberg is filled. The purpose for these orders it to hide the actual intent to buy or sell large quantities. This helps institutions and large traders to not be “front-run” by others who look to jump in front of their larger orders. One benefit of now being able to better track this activity, especially at key support and resistance levels, is have absolute knowledge of how much volume is trading without having to rely on the order book. Obviously the order book will not show this data without the Footprint. A simple example of an iceberg is shown in this video. Better examples present themselves every day, but we happened to be recording the market when this occurred.
Iceberg Order from MarketDelta on Vimeo. For more information on MarketDelta Trader or to demo the software, visit http://www.marketdelta.com/products/trader/brokers. Delta Tracking and MeasuringThis 4 minute video shows how to use the traditional charts and trend line tool to quickly measure the delta of a particular move. You choose the start and stop point by simply drawing the trend line and it will calculate the delta over that start and end point. This would typically be used measure rotations in market or a swing low to swing high level, etc. Those that use this tool want to be able to gauge one move against another and use the delta, along with the total volume, to qualitfy trading opportunities. Changing How Traders Use the DOMWe just launched MarketDelta Trader and are already hearing great things from many of you. Here is a recent comment: There is something quite unique about trading the ladder right next to the Footprint…it makes execution decisions that much quicker and also clearer to see. The secret is not another indicator or super duper, fancy named, complex system. The secret is taking what you already understand and adding another layer of precision and transparency. The secret is combining the Footprint chart with depth of market (DOM). This simple combination unlocks a lot of the mystery about the DOM and captures exactly what happened by showing how much volume traded at each price and if that volume was buyer or seller motivated. From our experience, many traders see the DOM and believe it is holy grail. What they fail to realize is that the DOM is the canvas from which the professional market makers, institutions, and prop traders use to paint what they WANT us to see. It is the perfect setup. Show people what they believe to be real and then take advantage of that belief. Never fear, the Footprint is here to help! The benefit of the Footprint coupled right along side the DOM is everything is immediately exposed the moment the trade occurs, meaning you don’t miss a thing and have better, more complete information to base your trading decisions. If you want to experience MarketDelta Trader for yourself, start here. Delta Divergence Chart SignalsWe 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.
Composite Volume ProfilesOne of the most popular features in MarketDelta is the ability to see volume distributions over a long period of time. For example, over the last 2 weeks or 2 years, where were the most-traded prices? Here is a quick tutorial. Using the Profile indicator, you can see this information easily. However, you must have access to good minute-based historical data, such as from DTN Market Access or IQFeed. If you do not have the price history on file, then you cannot view the composite volume profile. First, download as much minute data you need for the period you wish to study. In this example, I will look at the composite for the last year for the ES, so I start with a minute download:
Then, I look at any ES multi-pane chart, such as a footprint or candlestick chart, and change its view period to time period I wish to study:
After you are done, look back to the beginning of your chart to make sure it starts at the time that begins your study period. Finally, add an instance of the Profile indicator. One way to do this is to use the Insert button on your keyboard, then find the Profile indicator in the list. You will want to structure your Profile settings as follows:
You can also use the “auto peak” option if you want to have the indicator automatically create horizontal reference lines at the high-volume and low-volume nodes in the profile. You can adjust the sensitivity for this setting as well. Both options are near the bottom of this window:
When you are done, depending on your stylistic preferences, you will have a volume composite for the last year, like so:
Chart of the WeekIt just had to be crude oil. With so much news and geopolitical maneuvering we felt it only appropriate to give crude oil some more attention. There where numerable possible trades we could of focused in on, but this one really jumped out since it highlights a couple key points.
The bottom screenshot shows the Bid Ask Footprint chart. The beauty of this view is that it shows how bad the trapped buyers are stuck at the high. Yeah, of course price could have popped and taken out the high on the retest, but the fact it is didn’t. Armed with this information you have the transparency that very few people do and transparency provides confidence to do the right thing. It is this type of buying on the highs or selling on the lows that can produce a very nice pullback from that level, which aggressive scalpers can take advantage of. These two trades both had at least $0.50 ($500) pullbacks on 1 contract! Have you ever wondered when you go for the breakout trade and the market sometimes moves quickly against your position why this happens? This shows why…and traders using the Footprint know what to do. Starting to Learn the Order Flow BasicsNOTE: This material is straight from our guide “Learning to Read the MarketDelta Footprint®. It can be downloaded for free here. If the meaning of the phrase “order flow” is not clear to you, it should be by the end of this document. Order flow analysis is the missing link for many traders. It refers to how the orders are coming into the market, how they are being filled; whether executing at the offer or on the bid. It is the dual auction at the most micro-level. Assessing order flow in real time can tell the trader how trade is being facilitated in any direction, a key concept in auction market theory. The order flow patterns, as revealed by the Footprint® chart, that we’ll be looking at are NOT traditional price patterns. Rather, these are T&S patterns that you’ve probably never even realized existed. The T&S data simply moves too fast to comprehend, and then in a flash the data has scrolled by, out of site. The Footprint® patterns can be classified into three general categories: intra-Bar patterns, end of Bar patterns, Multi-Bar patterns. These patterns rarely, if ever, mean anything in and of themselves. This is where the MarketDelta Footprint® diverges radically from traditional price pattern and/or indicator based analysis. No attempt is made to oversimplify or under-simplify. Nor is the Footprint® a red light / green light type “system”. Instead, the insight gleaned from a deep and experienced comprehension of the Footprint®, allows the trader to integrate this data along with current market context and sound market logic. For example, In general, Market Profile®, support and resistance analysis, trend lines, and other macro-type big picture analysis provides the where to trade. The Footprint excels in showing when to trade because of the way it represents order flow and volume. After first gaining a basic understanding of what a Footprint® chart is (which presumably you’ve already achieved) the next step is to gain some level of observational awareness. Avoid making preconceived conclusions. Avoid deciding, in advance, what something is going to mean. Instead, begin the process with simply learning how to pick out key elements of Footprint® structure. That’s what this document is all about. Once you have gained some facility with what the various elements of Footprint® structure are, then you can begin coming to conclusions regarding the meaning of the elements in various contexts. Also, you can begin to assemble the elements into patterns. In this way, you’ll start making your own rules, based on what is real, not what some tradition, some book, or some trading guru has told you; which may or may not be valid information. The Footprint® lets you come to your own conclusions, if you learn to see the Footprint® in an unbiased fashion. Continue reading here. |
