Patterns in Delta

MarketDelta and the Footprint provide many unique ways to visualize market data. One of them uses delta as an interval to build new bars. Delta (chart interval) is unique to MarketDelta and excels at showing the volume and order flow information. Delta periodicity is most useful at identifying momentum in a market and the contraction of that momentum. Earlier today while trading the ES futures using a bid x ask Footprint chart with a delta periodicity of 2000 a great example surfaced that was worth sharing. It shows two runs of momentum with a break in between where the market topped out (balanced).

The topping of the move, and hence reversal, shows a very specific pattern that only the delta periodicity captures. The delta periodicity is extremely sensitive to order flow since it is order flow that builds the bars. The more directional the order flow the quicker a bar is completed.  In the move up and the move down (denoted by the bars near the arrows) the momentum and order flow was clearly defined using the Footprint chart. It shows relatively short, dark bars which indicate a high level of directional order flow. This translates to momentum.

The screenshot below shows a yellow box drawn around the topping action. It is at this point the order flow momentum really dried up and the trading became two sided, meaning the buyers were being equally challenged by the sellers. Instead of the buyers being in control, the trading becomes more balanced and random. At the very top you see the dark blue Footprint showing 1946 volume with absolutely no follow through, meaning not trades occurred higher.  This confirms the top as some large sellers are holding strong and have resting offers placed which are absorbing demand (buying) at these high levels.

Within a few minutes the market drifted lower and then selling momentum order flow ensued pushing prices lower. The Footprint helps traders stay nimble and react quickly to ever changing market conditions.

ES Trade Example from This Morning Using the Footprint

Spotting Large Volume Levels