MarketDelta as a Decision Support Tool

To illustrate how a trader can utilize MarketDelta when buying or selling, take again our scenario where a hypothetical trader chooses to enter the market by waiting for 1126.25 to become the bid price before selling. Although he wants to sell 200 contracts at this price, what if only 10 are available on the bid? If the trader chooses to sell the 10 contracts available, the unwanted affect of the bid price becoming the ask price may occur, i.e. price will move lower. If it does, this would leave his 190 contracts to sell exposed at the previous ask price. This, in turn, can send a trade-entry signal to other traders in the marketplace who also want to sell into the market and create more supply. This introduces the chance of the price shifting due to the influence of this supply and our trader will not be able to complete his intended trade. Now unfortunately, our trader, who has studied diligently using his “edge”, is suddenly prevented from successfully completing his trade. By understanding how MarketDelta™ interacts with price prior to, and at the time when, our hypothetical trader sells at his studied price when it becomes the bid, he will be better prepared to avoid exposing his entire order if the available quantity is not sufficient, and instead, sell his order in four separate trades of 50 contracts. Conversely, perhaps other clues in the market environment, such as momentary low demand, indicate to our trader that adding supply to this respective low demand would be in his best interest. In this instance, he might sell the available 10 contracts. This may cause a price shift from bid price to ask price, and this shift would perhaps send a signal out that there is supply at this ask price. His remaining 190 contracts might attract other trader’s to join in with more supply, thereby creating a buffer inhibiting the movement of the price upward. The trader may have chosen this course of action hoping for such events to unfold. Proper knowledge and use of environment has allowed the trader to complete a desirable mission. In both of the above situations, our trader would be steering his vehicle properly by acting on signals he has drawn from current market dynamics. In sum, by observing and understanding the market environment using MarketDelta , a trader dramatically increases the chance that his studied trade will be completed successfully. When a trader knows the market he is trading in, he can act in sync with the market as opposed to against it. When a trader unknowingly is acting against the market, he becomes his own worst enemy.

As mentioned above, it is not of concern as to why a trader is buying the ask or selling the bid. Of concern is only the fact that it has occurred. This fact is reflected by MarketDelta™ showing that a completed trade has been created accordingly, either on the bid or the ask side. From this fact, the premise, as discussed above, follows (using a buyer as an example): buyer’s action to buy the ask price to create a trade which results in volume does so because that buyer chooses to perform an aggressive action in the marketplace; he has chosen to drive by attempting to steer the price. It must be understood that these are aggressive actions and a trader using MarketDelta™ must follow this premise. Conceptually, this is what MarketDelta™ performs at its most basic level: it allows the trader to observe on which side—at the ask or at the bid—the aggressive actions are being taken. Armed with this knowledge, MarketDelta™ can thus be used as a viable decision support tool.