|
|
Paint Bar for Cumulative DeltaA very useful indicator that is built into MarketDelta is called the Paint Bar indicator. This indicator allows you to either paint the actual bar or background of the chart based upon a set of conditions. The conditions used to “paint” the bar or background are defined in a scan, signal, or custom indicator. With all the powerful volume and price related studies in MarketDelta, the possibilities are almost limitless in the types of things you can “paint” upon. In the example below I have taken the volume breakdown indicator and created a signal to plot the background based on whether the cumulative delta is positive or negative for the current session. In terms of applying this information, you could use the cumulative delta as a confirmation for trade direction. If green, buy pullbacks, if red, sell rallies. A more aggressive way to apply the indicator would be to use a Footprint chart with the shaded paint bar background. A Footprint chart inherently provides more data than just a bar chart and will give a better idea of order flow. This means you can jump on breakouts if the order flow is present instead of waiting for pullbacks. Here is how to do it, or just download the chart definition here. Create the signal first. The signal is just VB>0. Next, add the Paint Bars indicator, choose Signal, and select the signal you just created. Choose to Paint Background. Click “View” to update the settings or just view how the signal is setup. Double click Volume Breakdown to see the settings for the “VB” token. Here is the result once added to the chart. 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. Two-month Market Profile since August BreakdownFor two months, the market has received much attention for its high volatility, dramatic drops, increased risks and uncertainty. We’ve brushed with “bear territory” as the news media like to often repeat, and have had significant intraday declines reminiscent of 2008. What’s a trader to do? Here is a very simple chart with two useful long-term indicators added to it. This is a daily chart since the August “crash” that shows two trend lines and a volume profile of all trades during the last two months.
The first notable event on this chart is the triangle pattern with lower highs and higher lows over many weeks. Most traders understand that on any timeframe, a contraction of volatility precedes a notable move in one direction or the other. You can clearly see on this chart when the breakout of the triangle occurred, offering strong reasons to expect further declines. In fact, selling the bounce back into the triangle was a good short setup with good risk-to-reward. Now we are at today, October 5. The market has enjoyed a good rebound yesterday and, as of 1:40pm Central, another nice rebound today. But where do we put this in context? One of the immensely powerful and unique features of MarketDelta is the ability to create custom volume profiles over any period you wish. Using the Profile tool, we can build a distribution starting at the August breakdown to the present and clearly see where the value areas lie in today’s market environment. We can clearly see that, at the time of this writing, the market is touching the Value Area Low of this last period of rotation over two months. In fact, in the last few minutes while writing this article, the market sold off 5 points from this level, so anyone shorting this Value Area Low would have enjoyed a decent scalping opportunity. But when looking at the bigger picture, it is easy to see that, despite all the dire predictions among the analysts, the actual market activity is telling us something: The point of control (POC) is at 1157.25, making that a very reasonable and probable trading price, and the top of the Value Area isn’t until around 1200. To demonstrate how successfully Value Areas capture and predict market rotations, here is another graphic of the same chart, but the Profile is drawn to end at an earlier date:
By only showing what the Profile looked like at the time you might have traded it, you can see very clearly how the Value Area Low at that time effectively captured the market reversal that moved from around 1130 back up to 1200. And actually, the distribution has been so normal that the value area did not change much over the course of the following two weeks, showing just how predictable all of this volatility actually is. These are volatile times, but you can often simplify all the uncertainty with some basic views of the greater auction taking place over many days.
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. MarketDelta Launches New Trading Platform
MarketDelta has just launched an exciting new trading platform!
All you need is a demo account and license key. Just click the big yellow button below to visit our approved brokers page. Sign up using their signup form, and a demo login and license key will be emailed to you.
 MarketDelta Trader Testimonials
“If you trade, you need this platform! “ “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.” Heat Map for iPad, and Soon iPhone!About a month ago we released our first mobile app called Heat Map. It works with the iPad and there will soon be a version available for the iPhone (available in a week or so). Since its release we have received tremendous feedback and we already have some great enhancements in the works for the app. In fact, the Association Association of Individual Investors gave us “App of the Month” in computerized investing last month. So we are proud to have hit the mark for our first app and hope to continue doing so in the future. For those who don’t know what a heat map is, a heat map lets you visualize all the stocks of a given category in the order of their percentage returns, with different colors and shadings representing the quality and degree of their performance. So in the blink of an eye you can have an understanding of how the market is performing and which stocks are strong, and which ones are not. The Heat Map app has other map types allowing you to quick sort stocks based on other criteria, so check it out and let us know what you think! Below are two samples:
Available in the app store 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.
TPO Indicator, or Profile Indicator?While Market Profile charts are powerful and popular tools that appeal to many traders, MarketDelta also provides two indicators for viewing profiles on candlestick and Footprint charts. These are the “TPO Indicator” and “Profile Indicator.” The features of these two indicators at first seem similar, so you may find yourself wondering which to use. For example, with both indicators you can show information for the current day profile, or the previous day profile, or both. So what is the difference? The TPO indicator always shows data and profile levels based on 30-minute TPO letter durations. Thus, it closely matches what a true, traditional Market Profile chart shows. If you want to monitor Market Profile levels on your intraday chart, no matter what periodicity your chart is set to, use the TPO indicator. It will show the same value area and POC data as a Market Profile chart, no matter how your chart is organized. The Profile indicator draws value area and POC levels as well, but it uses the periodicity of the chart to determine the information. This primarily applies to time-based profiles, as opposed to volume-based. The cumulative volume for a price is going to be the same, whether you look at a 5-minute or 1.25 range or 1 minute or 233 tick chart. But the number of bars, and thus the number of times a specific price was charted, will widely vary depending on these periodicities. Thus the time-based profiles in the Profile indicator will not look the same as Market Profile charts unless you are using 30-minute candles or Footprints. Additionally, the Profile indicator offers many other features that are not available in the TPO indicator, such as long-term composites, the ability to split a session into up to three different profiles, and more. So it really depends on your needs and the type of precision you want to see in your profile results as to which of these two indicators you should use. 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:
|
