Now that we have covered the importance of observing the battle between the buyer and the seller before and during a successful trader’s entry into the market, let’s take a closer look at how MarketDelta™ displays this invaluable information. As stated, MarketDelta™ graphically displays the aforementioned market variables, plus the Delta (which shows market pressure), in a logical, coherent, and intuitive manner—and all of these elements are displayed in real time. There are four primary components to the MarketDelta™ display window: (a) the Battle Price line, (b) the Footprint Chart, (c) the Price Indicator Chart, and (d) the MarketDelta Indicator.
Again, one of MarketDelta™’s primary features is its ability to show bid and ask volume being created in real time. There are two places where MarketDelta™ displays this information: in the Battle Price Line or BPL window, and in the Footprint window. The BPL window shows trading volume, in real time, on both the bid and ask side while simultaneously showing price moving as it is affected by this volume. Here is where a trader should begin his observation of the market. The BPL contains two columns: a red column, which shows volume accumulating on the bid side, and, a blue column, which shows volume accumulating on the ask side. The bid price or ask price is indicated by showing this volume immediately adjacent to the price, which is displayed in a white column residing between the red and blue column. The price is shown descending from the top to the bottom of the window at the products’ smallest price interval, or price tick. Both the traded bid volume and the traded ask volume appear and aggregate in real time as the market product is traded. Drawing upon our earlier discussion of the battle between buyer and seller, the blue column will accumulate volume as the buyer’s action attempts to influence the price to shift from the ask price to the bid price; conversely, the red column will accumulate volume as the seller’s action attempts to influence the price to shift from the bid price to the ask price. By watching these numbers which in reality are traded volume accumulated, and by observing under what conditions these price shifts occur, a trader’s awareness of the current market conditions will increase as he will be witnessing the market environment pulsating with each trade being made in the market.To further illuminate how the distinct mechanics of BPL show how traded volume on the both the bid and ask side of the market interact with price as the market is traded, the following is a step-by-step portrayal of the BPL as it operates. As stated above, as a trade is created at the bid price or ask price, BPL reflects this change in either the red column or blue column, respectively, increasing the number to indicate the number of contracts traded. In addition to showing the volume, it must be understood that BPL is also showing whether the trade was made on the bid side of price, or on the ask side of price. For example, if the current bid traded volume of the S&P emini was 40 contracts at a bid price of 1125.50, the BPL will display the number 40 in the red column left of price which is designated (in S&P emini quarter point increments) in the white column separating the red and blue columns. Suppose the next trade is for 10 contracts at 1125.75, the current ask. As this trade is made, BPL will increase the number already to the right of 1125.75 in the blue column by 10. Thereafter, when a trade is made at new bid or ask price, the BPL will display the number of contracts for this trade adjacent to this new price, in either the red column or blue column, as the case may be, and erase the volume which had accumulated at the previous bid or ask. So to continue with our example, if the next trade is for 5 contracts at a new bid price of 1125.75, BPL will erase the bid volume of 40 in the red column adjacent to 1125.50, and display the number 5 at 1125.75 in the red column left of price. For the moment, the BPL shows the bid and ask volume at 1125.75. This will likely appear unusual because, typically, the bid more commonly is below the ask. In our example, bid traded volume at bid price 1126.75 is totally creditable and informative although it just takes understanding. Even though trade was made at what usually would be perceived as the ask, we know that this trade was actually made on the bid side, as evidenced by BPL’s display of a volume of 5 in the red column. The volume at the previous bid price of 1125.50 is erased, and BPL now displays bid volume accumulating next to 1125.75 in red column. And although the previous bid volume of 40 at 1125.50 is cleared to allow the BPL to show the current bid volume accumulating at 1125.75, MarketDelta™ records this volume in the aforementioned Footprint window (as detailed below).
A unique feature of the BPL is that as the volume on the bid and ask side is accumulating, a trader can simultaneously observe the product’s available quantities at the bid or ask diminish accordingly. This is shown in market depth, available through most order-entry or charting platforms, such as Trading Technologies, Patz, Eccoware, Trader Workstation (Interactive Brokers), MB Trader or other Independent Software Vendor (ISV). If this information is not provided to a trader, MarketDelta™ provides the first line of market depth located in its ticker window.
As pointed out above, as only the current bid or ask volume is displayed in the BPL, a trader can see the volume for a previous bid or ask price by referring to the Footprint window, the second place within MarketDelta™ a trader can observe the ongoing battle between the buyer and seller. In the Footprint window, while the market is trading at a particular price, a rectangular box is plotted on a price chart at this trading price; this box is called a Footprint. Traded volume at both the bid and the ask accumulate and this volume is shown within this rectangular box in the form of B x A, with B representing the traded bid volume and A representing the traded ask volume. While the market is trading at this price during a given moment, this bid and ask volume is displayed, similar to the BPL, within the Footprint.
The Footprint window works in concert with the BPL to give the user a multi-dimensional representation of the market environment. When a trade is made by the aggressor (i.e., at the bid price or the ask price), the same information that is revealed in the BPL will simultaneously be presented in a Footprint. The Footprint is permanent record of this volume. MarketDelta™ provides two modes which determine how Footprints are plotted, either in response to (i) price action, or (ii) time. When Footprints are plotted in response to price action, there are three factors relating to price, which determine how and when the Footprints are plotted, moving from left to right across the price chart. The first factor is that the volume must continue to be created at a particular price; this is simply due to the fact that volume drives the market. The second factor is that as price moves and volume is created at a particular price tick, it creates a Footprint series. The Footprint series will be given a direction, either up or down, as price moves, and new Footprints will be created at each tick accession where traded volume occurs, creating a column of Footprints. Lastly, this directional price series will continue in the direction the series is given until volume occurs at a user-specified number of ticks in the opposite direction to the direction of the series. At this point, a new Footprint column begins immediately to the right of the previous column with this volume placed in the first new Footprint in the new column. From here the process repeats itself. In this manner, new columns are created in response to price action, where each column is a trend in price, similar to “point and figure” charts. Alternatively, a user can set the Footprint chart to plot in response to time. In this mode, a new column of Footprints is created at a specified time interval, similar to classic bar charts. In either mode, as price moves up and down before a new column is triggered—be it in response to price action or time—volume at both the bid and ask will be added to the Footprints already plotted in that column, adding to the previous traded volume already in the Footprint. The Footprint chart provides a record to which a trader can refer to examine how the volume traded at both the bid and the ask interact with price.
In addition to the presenting and recording all of the information displayed in the BPL, the Footprint can be set to display alternative interpretations of this data. The Footprint window can be set to show bid and ask volume together, as discussed above, or it can be set to show the volume as the Delta (market pressure), total volume, or as strike volume. The Delta is the net of ask volume over bid volume; the current bid volume accumulating decreases the Delta while current ask volume accumulating will increase the Delta. For example, if 35 contracts are traded at the ask as a result of an aggressive buyer or buyers attempting to influence the ask to go bid and there are 100 contracts as a result of an aggressive seller or seller attempting to influence bid to go ask, the Delta, displayed within the applicable Footprint, is shown as -65 (-100 contracts (bid) + 35 contracts (ask) = -65). As mentioned above, this number is a barometer of market pressure.
If the Footprint window is set to total volume, each Footprint simply displays the aggregate of bid and ask volume. If set to strike volume, each footprint shows the total number of trades, or strikes, on the bid side and on the ask side, displayed in a format similar to the way bid and ask volume is displayed. Each strike represents a single trade as opposed to the number of contracts comprising a trade.Lastly, MarketDelta™ has the ability to display volume in a manner, which allows the user to determine overall market pressure. Market pressure is simply the pressure being put on the market by the aggressive buyers and sellers. By understanding how this pressure intensifies and diminishes, and what effect, if any, this pressure has on price, a trader using MarketDelta™ as a depiction of the market environment will be better prepared to anticipate a potential market trend or change.
Market pressure is displayed in the MarketDelta Indicator window. Similar to the way the Delta in each Footprint indicates market pressure at a particular price or for a specified unit of time, the MarketDelta Indicator displays the aggregate volume traded at the ask over the aggregate volume traded at the bid for the entire trading day, or a sum of all of the Delta levels contained in each Footprint. In addition, the MarketDelta Indicator will display the low and high-pressure levels for the trading day to allow a user to use these levels similar to the way support and resistance levels are used with price. Every time a trade is created, the MarketDelta Indicator will change, increasing the indicator number by the number of contracts traded at ask price and decreasing the indicator number by the number of contracts traded at the bid price.
So as to allow the trader using
MarketDelta to visualize what affect market pressure has on traded price, there is the Price/Indicator window. The Price/Indicator window plots both the value of the MarketDelta Indicator, and the price, in an equivalently scaled overlay chart. With the Price/Indicator window a trader can see at any point whether the buyer or the seller is exerting pressure on the market, either by observing how price is being plotted as traders seek a price at which to trade, or by observing volume created by aggressors. From these observations, the trader using MarketDelta™ can refer to the traded price in either the BPL or Footprint window, and note how these pressures are affecting it.
To understand how a trader using MarketDelta can observe the interaction between market pressure and the traded price, it is necessary to understand who, between the buyer and seller, is exhibiting strength in the market. Essentially, at any given moment there is a battle by the buyer over the price being asked by the seller (i.e., the ask price), or conversely, by the seller over the price being bid by the buyer (i.e., the bid price). Whenever a participant in the market is attempting an aggressive action, by either selling the bid price or buying the ask price, pressure is being exerted on price. So how does a trader know if either the buyer or seller is showing strength? Strength in the market is shown primarily using the principles of supply and demand. A successful online trader must understand how both supply and demand can independently affect market price. MarketDelta™ monitors demand by the buyer seeking trade with use of his purchasing power (or potential supply to seller) or demand by seller seeking a trade with use of his selling power (or potential supply to buyer). I want to allow for my use of demand to be understood as it is being put into this context. It can be confused when thinking in the economics sense from the academia. I am using demand in the sense of “eagerness.” Trader can be eager to demand price up or down as well as demand the reception of volume when available. For instance, high demand by buyer or high demand by seller may or may not effect movement of price. High demand in the market will only affect price when there is an imbalance of supply between buyer and seller. Consequently, if the supply available to buyers and sellers is relatively equal, then the demand seeking trade will cause minimum price movement. By understanding supply and demand within the framework of MarketDelta™ an online trader can thereby observe strength in buying and selling in two ways.
The first way a seller or buyer shows strength is by observing strong demand by the buyer or seller in his attempts to seek a trade. When there is a quantity available from sellers at the ask price, buyers may buy from this quantity by buying at the ask price, simultaneously decreasing supply and, in addition increasing traded ask volume. As noted above, when a buyer buys at the ask price, the buyer is being aggressive. If the buyer demand is high, meaning the buyers’ actions to seek trade increasingly become more aggressive, eventually—if additional supply is not created by sellers adding to the quantity available at that ask price—the supply at that ask price is reduced to zero. At this point, the ask price will shift and become the bid price. It is this price shift, which indicates complete strength by the buyer. The buyer, showing demand and having purchased all available supply at the ask price, indicates his dominance over price and the next higher price having a quantity or supply available will become the new ask price. At this moment, the buyer is dominating the price, and in turn, showing strength in the market. Sellers show strength in the market in exactly the same way. Aggressive sellers show demand by seeking to trade at the bid where supply exists. Selling at the bid will decrease supply available at the bid price while increasing traded bid volume. If the supply coming from the sellers wishing to sell at the bid is greater than the demand from buyers wanting to pay the bid price, the number of contracts to buy at the bid will be exhausted by the sellers at the bid and the next highest bid will become the best bid-i.e. the bid will decline. The former bid price will then probably become the ask price. At this moment, sellers are dominating the bid price and showing strength in the market. When buyers are showing strength in this way, traded ask volume exceeds traded bid volume resulting in an increase in the value of the MarketDelta Indicator. When sellers are showing strength in this way, traded bid volume exceeds traded ask volume resulting in decrease in the value of the MarketDelta Indicator. When this happens, MarketDelta’s™ Price/Indicator window will show both the plotting of price and that of the value of the MarketDelta Indicator increasing, or decreasing, as the case may be, as price and volume (created by the aggressive buyers or sellers) move together, as demand outstrips supply and price moves up.
The second way strength is shown in the market is through price velocity. In this situation strength by buyer is the result of seller’s weakness. In this case, supply is low enough for buyers to continue to drive price in search of trade with no signs of sellers’ strength. Buyers strength is such that price is being driven up by the buyer because supply cannot meet the current demand by buyers seeking trade; price increases in search of supply. Essentially, buyer demand, while not being high, is uncontested by sellers. In other words, as there is little to no supply available from sellers at the ask price, so price marches upward to find quantity to buy. Buyers are able to drive the price up due to the fact that quantity is scarce at these prices. Buyer demand while seeking a trade may necessitate travel through several prices. Until buyers find sufficient quantity available, volume will not increase. This in turn will be reflect by MarketDelta’s™ Price/Indicator window showing the plotting of price increasing with the MarketDelta Indicator bar remaining relatively flat. This is also shown when there is a gap in the Footprint chart indicating no trades were made at particular prices during the price series. In these situations when buyers are driving prices upward without the corresponding ask volume, the buyer is showing strength by its ability to drive prices higher due to minimal supply by seller.
MarketDelta = The Market Environment
As previously stated, just knowing on which side of the market the aggressive actions are being taken will not benefit the trader unless he continually observes and understands the market environment. Here is where MarketDelta becomes more than just a decision support tool. Besides showing trades being completed at the bid or ask side, MarketDelta also displays all six market variables mentioned above (buyer’s action, seller’s action, bid price, ask price, traded price and volume), plus a barometer which displays market pressure, referred to as the Delta. The six market variables and their numerous interrelationships comprise the entire market environment. The Delta is displayed in two formats. The trader may view it in one window as a spot indicator for a unit of time (called a Footprint, discussed below), and in another window as an overall number for the trading day. Each variable interacts with the others variables in unlimited ways while traders seek a price at which to trade. Using MarketDelta™, a trader can observe each of these variables change and interact during the trading day. Before and after buyer and seller meet and a trade is created, any one or more of these variables may change, which in turn, may cause one or more of the variables to change again, and so on, each variable being altered in an ongoing manner while trades are being made. The constant state of flux is due to each variable’s subtle influence on the remaining variables. By being able to see these variables influence each other and change according to the dynamic of a given trade allows MarketDelta to become the environment in which the trader can exist and be a part of so as to trade more effectively.
As stated above, when a buyer meets a seller at a particular price a trade is created, increasing volume. That price can be at the ask or the bid. After the trade is made and volume is created, the trading variables comprising the market environment are altered and there is the potential for a price shift, e.g., the ask price can become the bid price (price moves higher), or, alternatively, the bid price can become the ask price (price moves lower). Due to the fact that there are several trading variables, which comprise the market, it cannot be known to any degree of certainty how much volume is needed for this price shift to occur. However, a trader can utilize MarketDelta™ to observe how the remaining variables are influenced by a trade; he can observe how these variables react and change in real time. This knowledge- and observing the repercussive outcomes- can assist a trader in his understanding of how each trade reverberates throughout the market. This allows the trader to possess the requisite knowledge needed to anticipate a potential price shift with increased accuracy. As each trading variable is affected by the change of another, a shift in price may result from any number of factors relating to the changes in these variables. It follows therefore, given the almost infinite conditions a market may experience, absolute prediction is an impossibility. However, learning how these variables interact and influence one another allows a trader to significantly increase his awareness of the market environment. Through experience a trader will begin to see familiar rhythms and patterns, and while, as stated, these rhythms and patterns will probably never be identical, his experience of previous market conditions which comprised different market environments can guide him with more precision when placing his trade.
MarketDelta™ focuses on the change of each of the trading variables and how their interactions affect a particular product’s environment. By increasing your awareness of your product’s market environment, the benefits of your chosen trading tool or “weapon” will increase dramatically. Trading tools such experience, knowledge of support/resistance, pivot points, indicators, Fibonacci numbers, Gann forecasting, Elliot Wave analysis, among many others, will become more valuable to the trader who uses them. Not only will the benefits gained from using these tools increase, but by observing and understanding the trader’s product’s environment, he will develop the knowledge to recognize when to use a given tool, or, just as importantly, when not to use it! MarketDelta™ will allow immersion into the market so a trader can act with it and not against it. Because MarketDelta™ graphically displays the elements of the market and interaction between buyer’s action, seller’s action, bid price, ask price, traded price and volume, MarketDelta™, with time and diligence, can signal to a trader using it, a familiar condition experienced previously. As stated, no two-market environments will ever be identical; as with life, the only constant in a market environment is change itself. However, a trader will become familiar with these changes, and begin to understand them and not fear them because of his experience of other market environments previously observed through MarketDelta .
Consider again our hypothetical trader: while he is diligently armed with his Fibonacci retracement number, ready to enter the market at his studied price, he may not have courage or experience to complete his trade successfully. As stated above, he may not fill his entire order, or, he may miss getting his studied entry price. This is where MarketDelta’s™ representation of the market environment provides a trader a place in which to immerse himself in order to gain experience. By observing the market environment through MarketDelta™, his ratio of success will increase. Over time, a trader will gain experience about the interactions of price, action of buyers, action of sellers, and the bid and ask volume traded. Consequently, his confidence in making his trades will thus improve. This is the foundation MarketDelta™ is built on: by observing the market and by operating within it, a trader increases his chance for success.
MarketDelta’s™ representation of the market environment does not only assist a trader in his entries or exits in the market. A successful trader’s job is not to just sit back and wait for his targets or his stops to be hit. Once placed, a successful trader needs to continually manage his trade. After entering the market, a successful trader must be proactive; he must continue to observe the ongoing battle between the buyer and seller who are trying to exert their will on the ask price and bid price, respectively, so to cause it to move in their desired direction. A successful trader must make use of all available information at his disposal once his trade has been placed. MarketDelta™ displays the variables and their altered state (buyer’s actions, seller’s actions, bid price and ask price --and their respective volume - and market pressure). Delivering key information pertaining to the buying and selling pressure left behind after each and every trade is an important concept behind MarketDelta’s™ creation. This key information will enable a trader to manage his trade by knowing in advance if conditions are right for him to stay in or get out.
Again, one of MarketDelta™’s primary features is its ability to show bid and ask volume being created in real time. There are two places where MarketDelta™ displays this information: in the Battle Price Line or BPL window, and in the Footprint window. The BPL window shows trading volume, in real time, on both the bid and ask side while simultaneously showing price moving as it is affected by this volume. Here is where a trader should begin his observation of the market. The BPL contains two columns: a red column, which shows volume accumulating on the bid side, and, a blue column, which shows volume accumulating on the ask side. The bid price or ask price is indicated by showing this volume immediately adjacent to the price, which is displayed in a white column residing between the red and blue column. The price is shown descending from the top to the bottom of the window at the products’ smallest price interval, or price tick. Both the traded bid volume and the traded ask volume appear and aggregate in real time as the market product is traded. Drawing upon our earlier discussion of the battle between buyer and seller, the blue column will accumulate volume as the buyer’s action attempts to influence the price to shift from the ask price to the bid price; conversely, the red column will accumulate volume as the seller’s action attempts to influence the price to shift from the bid price to the ask price. By watching these numbers which in reality are traded volume accumulated, and by observing under what conditions these price shifts occur, a trader’s awareness of the current market conditions will increase as he will be witnessing the market environment pulsating with each trade being made in the market.To further illuminate how the distinct mechanics of BPL show how traded volume on the both the bid and ask side of the market interact with price as the market is traded, the following is a step-by-step portrayal of the BPL as it operates. As stated above, as a trade is created at the bid price or ask price, BPL reflects this change in either the red column or blue column, respectively, increasing the number to indicate the number of contracts traded. In addition to showing the volume, it must be understood that BPL is also showing whether the trade was made on the bid side of price, or on the ask side of price. For example, if the current bid traded volume of the S&P emini was 40 contracts at a bid price of 1125.50, the BPL will display the number 40 in the red column left of price which is designated (in S&P emini quarter point increments) in the white column separating the red and blue columns. Suppose the next trade is for 10 contracts at 1125.75, the current ask. As this trade is made, BPL will increase the number already to the right of 1125.75 in the blue column by 10. Thereafter, when a trade is made at new bid or ask price, the BPL will display the number of contracts for this trade adjacent to this new price, in either the red column or blue column, as the case may be, and erase the volume which had accumulated at the previous bid or ask. So to continue with our example, if the next trade is for 5 contracts at a new bid price of 1125.75, BPL will erase the bid volume of 40 in the red column adjacent to 1125.50, and display the number 5 at 1125.75 in the red column left of price. For the moment, the BPL shows the bid and ask volume at 1125.75. This will likely appear unusual because, typically, the bid more commonly is below the ask. In our example, bid traded volume at bid price 1126.75 is totally creditable and informative although it just takes understanding. Even though trade was made at what usually would be perceived as the ask, we know that this trade was actually made on the bid side, as evidenced by BPL’s display of a volume of 5 in the red column. The volume at the previous bid price of 1125.50 is erased, and BPL now displays bid volume accumulating next to 1125.75 in red column. And although the previous bid volume of 40 at 1125.50 is cleared to allow the BPL to show the current bid volume accumulating at 1125.75, MarketDelta™ records this volume in the aforementioned Footprint window (as detailed below).
A unique feature of the BPL is that as the volume on the bid and ask side is accumulating, a trader can simultaneously observe the product’s available quantities at the bid or ask diminish accordingly. This is shown in market depth, available through most order-entry or charting platforms, such as Trading Technologies, Patz, Eccoware, Trader Workstation (Interactive Brokers), MB Trader or other Independent Software Vendor (ISV). If this information is not provided to a trader, MarketDelta™ provides the first line of market depth located in its ticker window.
As pointed out above, as only the current bid or ask volume is displayed in the BPL, a trader can see the volume for a previous bid or ask price by referring to the Footprint window, the second place within MarketDelta™ a trader can observe the ongoing battle between the buyer and seller. In the Footprint window, while the market is trading at a particular price, a rectangular box is plotted on a price chart at this trading price; this box is called a Footprint. Traded volume at both the bid and the ask accumulate and this volume is shown within this rectangular box in the form of B x A, with B representing the traded bid volume and A representing the traded ask volume. While the market is trading at this price during a given moment, this bid and ask volume is displayed, similar to the BPL, within the Footprint.
The Footprint window works in concert with the BPL to give the user a multi-dimensional representation of the market environment. When a trade is made by the aggressor (i.e., at the bid price or the ask price), the same information that is revealed in the BPL will simultaneously be presented in a Footprint. The Footprint is permanent record of this volume. MarketDelta™ provides two modes which determine how Footprints are plotted, either in response to (i) price action, or (ii) time. When Footprints are plotted in response to price action, there are three factors relating to price, which determine how and when the Footprints are plotted, moving from left to right across the price chart. The first factor is that the volume must continue to be created at a particular price; this is simply due to the fact that volume drives the market. The second factor is that as price moves and volume is created at a particular price tick, it creates a Footprint series. The Footprint series will be given a direction, either up or down, as price moves, and new Footprints will be created at each tick accession where traded volume occurs, creating a column of Footprints. Lastly, this directional price series will continue in the direction the series is given until volume occurs at a user-specified number of ticks in the opposite direction to the direction of the series. At this point, a new Footprint column begins immediately to the right of the previous column with this volume placed in the first new Footprint in the new column. From here the process repeats itself. In this manner, new columns are created in response to price action, where each column is a trend in price, similar to “point and figure” charts. Alternatively, a user can set the Footprint chart to plot in response to time. In this mode, a new column of Footprints is created at a specified time interval, similar to classic bar charts. In either mode, as price moves up and down before a new column is triggered—be it in response to price action or time—volume at both the bid and ask will be added to the Footprints already plotted in that column, adding to the previous traded volume already in the Footprint. The Footprint chart provides a record to which a trader can refer to examine how the volume traded at both the bid and the ask interact with price.
In addition to the presenting and recording all of the information displayed in the BPL, the Footprint can be set to display alternative interpretations of this data. The Footprint window can be set to show bid and ask volume together, as discussed above, or it can be set to show the volume as the Delta (market pressure), total volume, or as strike volume. The Delta is the net of ask volume over bid volume; the current bid volume accumulating decreases the Delta while current ask volume accumulating will increase the Delta. For example, if 35 contracts are traded at the ask as a result of an aggressive buyer or buyers attempting to influence the ask to go bid and there are 100 contracts as a result of an aggressive seller or seller attempting to influence bid to go ask, the Delta, displayed within the applicable Footprint, is shown as -65 (-100 contracts (bid) + 35 contracts (ask) = -65). As mentioned above, this number is a barometer of market pressure.
If the Footprint window is set to total volume, each Footprint simply displays the aggregate of bid and ask volume. If set to strike volume, each footprint shows the total number of trades, or strikes, on the bid side and on the ask side, displayed in a format similar to the way bid and ask volume is displayed. Each strike represents a single trade as opposed to the number of contracts comprising a trade.Lastly, MarketDelta™ has the ability to display volume in a manner, which allows the user to determine overall market pressure. Market pressure is simply the pressure being put on the market by the aggressive buyers and sellers. By understanding how this pressure intensifies and diminishes, and what effect, if any, this pressure has on price, a trader using MarketDelta™ as a depiction of the market environment will be better prepared to anticipate a potential market trend or change.
Market pressure is displayed in the MarketDelta Indicator window. Similar to the way the Delta in each Footprint indicates market pressure at a particular price or for a specified unit of time, the MarketDelta Indicator displays the aggregate volume traded at the ask over the aggregate volume traded at the bid for the entire trading day, or a sum of all of the Delta levels contained in each Footprint. In addition, the MarketDelta Indicator will display the low and high-pressure levels for the trading day to allow a user to use these levels similar to the way support and resistance levels are used with price. Every time a trade is created, the MarketDelta Indicator will change, increasing the indicator number by the number of contracts traded at ask price and decreasing the indicator number by the number of contracts traded at the bid price.
So as to allow the trader using
MarketDelta to visualize what affect market pressure has on traded price, there is the Price/Indicator window. The Price/Indicator window plots both the value of the MarketDelta Indicator, and the price, in an equivalently scaled overlay chart. With the Price/Indicator window a trader can see at any point whether the buyer or the seller is exerting pressure on the market, either by observing how price is being plotted as traders seek a price at which to trade, or by observing volume created by aggressors. From these observations, the trader using MarketDelta™ can refer to the traded price in either the BPL or Footprint window, and note how these pressures are affecting it.
To understand how a trader using MarketDelta can observe the interaction between market pressure and the traded price, it is necessary to understand who, between the buyer and seller, is exhibiting strength in the market. Essentially, at any given moment there is a battle by the buyer over the price being asked by the seller (i.e., the ask price), or conversely, by the seller over the price being bid by the buyer (i.e., the bid price). Whenever a participant in the market is attempting an aggressive action, by either selling the bid price or buying the ask price, pressure is being exerted on price. So how does a trader know if either the buyer or seller is showing strength? Strength in the market is shown primarily using the principles of supply and demand. A successful online trader must understand how both supply and demand can independently affect market price. MarketDelta™ monitors demand by the buyer seeking trade with use of his purchasing power (or potential supply to seller) or demand by seller seeking a trade with use of his selling power (or potential supply to buyer). I want to allow for my use of demand to be understood as it is being put into this context. It can be confused when thinking in the economics sense from the academia. I am using demand in the sense of “eagerness.” Trader can be eager to demand price up or down as well as demand the reception of volume when available. For instance, high demand by buyer or high demand by seller may or may not effect movement of price. High demand in the market will only affect price when there is an imbalance of supply between buyer and seller. Consequently, if the supply available to buyers and sellers is relatively equal, then the demand seeking trade will cause minimum price movement. By understanding supply and demand within the framework of MarketDelta™ an online trader can thereby observe strength in buying and selling in two ways.
The first way a seller or buyer shows strength is by observing strong demand by the buyer or seller in his attempts to seek a trade. When there is a quantity available from sellers at the ask price, buyers may buy from this quantity by buying at the ask price, simultaneously decreasing supply and, in addition increasing traded ask volume. As noted above, when a buyer buys at the ask price, the buyer is being aggressive. If the buyer demand is high, meaning the buyers’ actions to seek trade increasingly become more aggressive, eventually—if additional supply is not created by sellers adding to the quantity available at that ask price—the supply at that ask price is reduced to zero. At this point, the ask price will shift and become the bid price. It is this price shift, which indicates complete strength by the buyer. The buyer, showing demand and having purchased all available supply at the ask price, indicates his dominance over price and the next higher price having a quantity or supply available will become the new ask price. At this moment, the buyer is dominating the price, and in turn, showing strength in the market. Sellers show strength in the market in exactly the same way. Aggressive sellers show demand by seeking to trade at the bid where supply exists. Selling at the bid will decrease supply available at the bid price while increasing traded bid volume. If the supply coming from the sellers wishing to sell at the bid is greater than the demand from buyers wanting to pay the bid price, the number of contracts to buy at the bid will be exhausted by the sellers at the bid and the next highest bid will become the best bid-i.e. the bid will decline. The former bid price will then probably become the ask price. At this moment, sellers are dominating the bid price and showing strength in the market. When buyers are showing strength in this way, traded ask volume exceeds traded bid volume resulting in an increase in the value of the MarketDelta Indicator. When sellers are showing strength in this way, traded bid volume exceeds traded ask volume resulting in decrease in the value of the MarketDelta Indicator. When this happens, MarketDelta’s™ Price/Indicator window will show both the plotting of price and that of the value of the MarketDelta Indicator increasing, or decreasing, as the case may be, as price and volume (created by the aggressive buyers or sellers) move together, as demand outstrips supply and price moves up.
The second way strength is shown in the market is through price velocity. In this situation strength by buyer is the result of seller’s weakness. In this case, supply is low enough for buyers to continue to drive price in search of trade with no signs of sellers’ strength. Buyers strength is such that price is being driven up by the buyer because supply cannot meet the current demand by buyers seeking trade; price increases in search of supply. Essentially, buyer demand, while not being high, is uncontested by sellers. In other words, as there is little to no supply available from sellers at the ask price, so price marches upward to find quantity to buy. Buyers are able to drive the price up due to the fact that quantity is scarce at these prices. Buyer demand while seeking a trade may necessitate travel through several prices. Until buyers find sufficient quantity available, volume will not increase. This in turn will be reflect by MarketDelta’s™ Price/Indicator window showing the plotting of price increasing with the MarketDelta Indicator bar remaining relatively flat. This is also shown when there is a gap in the Footprint chart indicating no trades were made at particular prices during the price series. In these situations when buyers are driving prices upward without the corresponding ask volume, the buyer is showing strength by its ability to drive prices higher due to minimal supply by seller.
MarketDelta = The Market Environment
As previously stated, just knowing on which side of the market the aggressive actions are being taken will not benefit the trader unless he continually observes and understands the market environment. Here is where MarketDelta becomes more than just a decision support tool. Besides showing trades being completed at the bid or ask side, MarketDelta also displays all six market variables mentioned above (buyer’s action, seller’s action, bid price, ask price, traded price and volume), plus a barometer which displays market pressure, referred to as the Delta. The six market variables and their numerous interrelationships comprise the entire market environment. The Delta is displayed in two formats. The trader may view it in one window as a spot indicator for a unit of time (called a Footprint, discussed below), and in another window as an overall number for the trading day. Each variable interacts with the others variables in unlimited ways while traders seek a price at which to trade. Using MarketDelta™, a trader can observe each of these variables change and interact during the trading day. Before and after buyer and seller meet and a trade is created, any one or more of these variables may change, which in turn, may cause one or more of the variables to change again, and so on, each variable being altered in an ongoing manner while trades are being made. The constant state of flux is due to each variable’s subtle influence on the remaining variables. By being able to see these variables influence each other and change according to the dynamic of a given trade allows MarketDelta to become the environment in which the trader can exist and be a part of so as to trade more effectively.
As stated above, when a buyer meets a seller at a particular price a trade is created, increasing volume. That price can be at the ask or the bid. After the trade is made and volume is created, the trading variables comprising the market environment are altered and there is the potential for a price shift, e.g., the ask price can become the bid price (price moves higher), or, alternatively, the bid price can become the ask price (price moves lower). Due to the fact that there are several trading variables, which comprise the market, it cannot be known to any degree of certainty how much volume is needed for this price shift to occur. However, a trader can utilize MarketDelta™ to observe how the remaining variables are influenced by a trade; he can observe how these variables react and change in real time. This knowledge- and observing the repercussive outcomes- can assist a trader in his understanding of how each trade reverberates throughout the market. This allows the trader to possess the requisite knowledge needed to anticipate a potential price shift with increased accuracy. As each trading variable is affected by the change of another, a shift in price may result from any number of factors relating to the changes in these variables. It follows therefore, given the almost infinite conditions a market may experience, absolute prediction is an impossibility. However, learning how these variables interact and influence one another allows a trader to significantly increase his awareness of the market environment. Through experience a trader will begin to see familiar rhythms and patterns, and while, as stated, these rhythms and patterns will probably never be identical, his experience of previous market conditions which comprised different market environments can guide him with more precision when placing his trade.
MarketDelta™ focuses on the change of each of the trading variables and how their interactions affect a particular product’s environment. By increasing your awareness of your product’s market environment, the benefits of your chosen trading tool or “weapon” will increase dramatically. Trading tools such experience, knowledge of support/resistance, pivot points, indicators, Fibonacci numbers, Gann forecasting, Elliot Wave analysis, among many others, will become more valuable to the trader who uses them. Not only will the benefits gained from using these tools increase, but by observing and understanding the trader’s product’s environment, he will develop the knowledge to recognize when to use a given tool, or, just as importantly, when not to use it! MarketDelta™ will allow immersion into the market so a trader can act with it and not against it. Because MarketDelta™ graphically displays the elements of the market and interaction between buyer’s action, seller’s action, bid price, ask price, traded price and volume, MarketDelta™, with time and diligence, can signal to a trader using it, a familiar condition experienced previously. As stated, no two-market environments will ever be identical; as with life, the only constant in a market environment is change itself. However, a trader will become familiar with these changes, and begin to understand them and not fear them because of his experience of other market environments previously observed through MarketDelta .
Consider again our hypothetical trader: while he is diligently armed with his Fibonacci retracement number, ready to enter the market at his studied price, he may not have courage or experience to complete his trade successfully. As stated above, he may not fill his entire order, or, he may miss getting his studied entry price. This is where MarketDelta’s™ representation of the market environment provides a trader a place in which to immerse himself in order to gain experience. By observing the market environment through MarketDelta™, his ratio of success will increase. Over time, a trader will gain experience about the interactions of price, action of buyers, action of sellers, and the bid and ask volume traded. Consequently, his confidence in making his trades will thus improve. This is the foundation MarketDelta™ is built on: by observing the market and by operating within it, a trader increases his chance for success.
MarketDelta’s™ representation of the market environment does not only assist a trader in his entries or exits in the market. A successful trader’s job is not to just sit back and wait for his targets or his stops to be hit. Once placed, a successful trader needs to continually manage his trade. After entering the market, a successful trader must be proactive; he must continue to observe the ongoing battle between the buyer and seller who are trying to exert their will on the ask price and bid price, respectively, so to cause it to move in their desired direction. A successful trader must make use of all available information at his disposal once his trade has been placed. MarketDelta™ displays the variables and their altered state (buyer’s actions, seller’s actions, bid price and ask price --and their respective volume - and market pressure). Delivering key information pertaining to the buying and selling pressure left behind after each and every trade is an important concept behind MarketDelta’s™ creation. This key information will enable a trader to manage his trade by knowing in advance if conditions are right for him to stay in or get out.
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