|
Delta Footprint®
Market participants decide if it is in their interest to buy or sell as each individual price is presented. Because there are numerous participants scrutinizing and participating at each price, the Delta Footprints® job is to keep track and display the net difference between buyer initiated volume and seller initiated volume at each price.
To understand the use of the Delta Footprint®, a trader first needs to understand that a traded price will have a mix of aggressive buyers and aggressive sellers. An aggressive buyer is one who is willing to aggressively get in the market by buying the ask (offer), unlike the non-aggressor whose interest is in placing an order at best bid or below (no guarantee of a fill). An aggressive seller is one who is willing to aggressively get in the market by selling (hitting) the bid. The non-aggressive seller would place their order at the best offer or above and wait to see if the order gets filled (no guarantees!).
Secondly, markets rarely have price go in one direction without contention. Aggressive buyers challenging the aggressive seller (vice versa) will cause contention at each individual price. Delta Footprint® will show the (net traded volume difference) between the aggressive buyer and the aggressive seller at each individual price.
The idea behind Delta Footprint® is to confirm a price trend. As price rallies, it's crucial to know how volume interacts with the bid and the ask. Knowledge of this interaction helps to determine if aggressive buyers in the market are succeeding in driving price higher. To see price rally and actually have more volume taking place on the bid is a revealing sign that the rally might not hold.
Rule of Thumb - In many markets you should expect to see more of the transacted order flow (volume) occur in the direction of the trend, be it a short term swing or a longer term move away from value. Positive delta (green Footprints®) indicate more aggressive buying and "up" or "positive" volume. Negative delta (red Footprints®) indicate more aggressive selling and "down" or "negative" volume. One of the simplest ways to keep track of this is the bar delta down at the bottom of each bar.
Learning Opportunity! - To learn more about the Footprints® click below. It's a short recording to teach you more and assure you get the most out of MarketDelta®.
|
