Volume Delta Analysis Thread

[Soultrader]

I want to dedicate this thread to a study of Volume Delta. Delta is still a relatively new study to me so please add your input freely.

Quick Intro to Volume Indicators

Below is a list of TS indicators created by the members of the forum:

1. Volume Delta created by Walterw
2. Volume Delta Oscillator created by Walterw
3. Up/Down Volume Indicator created by Blu-Ray
4. Market Delta Footprint created by Ant
5. Bid-Ask Tape Indicator created by Insideday

The indicators above show an interesting way of viewing bid vs ask per price bar. Instead of just a simple volume histogram, it shows whether the buyers or sellers are in control and can be very useful in analyzing supply vs demand as price approaches a key pivot or support and resistance level.

I am currently using the Volume Delta created by Walterw, so I will be referring to it for my charts. What I want to accomplish is to design new strategies based on delta. Perhaps combining other tools to help decide turning points in the market and to create filter/rules for each delta based setup. I will be looking forward to various inputs from traders.

My setups and strategies are still in the beta phase where I am still testing out different methods. But I would like to go over one observation I found interesting. It is a combination of the TTM Heikin-Ashi Indicator and the Volume Delta. I am interested in price behavior as it reaches a key pivot such as daily pivots, previous day low/high, 50% fib retracement, VAL, VAH, and POC.

Let's take a look at the first example. The chart below uses a 50-61.8% fibonacci retracement clustered up with a daily pivot (PP). In combination with the fibs and PP, I am interested in using delta to further help me enter a position. The example shows a color divergence between the TTM Heikin-Ashi and Volume Delta. Notice the blue TTM vs a red on top Volume Delta. This shows price advancement but with seller dominance.




The second example below from Jan. 31st, 2007 requires further analysis. Its a fairly interesting chart with a combination of delta and volume analysis. Notice the first group of arrows. This shows the first half hour of choppy trading using the Value high pivot as support. Notice the several TTM and Volume Delta color divergence. Next, notice the increase in volume with the uptrend showing confirmation. The pullback occurs on less volume. Also notice the TTM and Volume Delta color divergence as price pulls back. Then an increase in volume again for a continuation of the rally.



Very interesting examples of Volume Delta in action. I understand that some of you use Oscillators for Delta to look for divergences. Please add your input on this. My aim here is to really dig deeper into Delta and how we can all design trading setups that will put the odds in our favor. Thanks

[wsam29]

You know what I noticed when I plot floor trader pivots to NYSE stocks, they trade pretty well off them.
I don't have real time to NASDAQ or other exchanges.

Try it yourself, this is the Tradestation floor trader pivot indicator that plots the levels on its own based on the previous days close.

[notouch]

What are the benefits of using tick delta compared to volume? Common theory is that you buy when price and volume are increasing at support or sell when price is decreasing but volume is increasing at resistance. This seems to be a better way of looking at it than tick delta. As I understand it tick delta doesn't distinguish between a 1 contract tick and a 100 contract tick.

[Soultrader]

Good point there notouch. How about the Volume Up/Down indicator by Blu-Ray? From my understanding it will plot buy volume vs sell volume. My main focus is to better understand fear vs greed. Yes volume alone will show this. However, let's say a tall red candlestick occurs on nice volume. A simple volume histogram would indicate panic and alot of selling. However, the volume up/down or TICK delta indicator would show the ratio of sellers vs buyers. This can be useful in getting in 1-2 candlesticks earlier before the crowd. Although volume spikes can indicate a reversal, price can still decline. (price often reverses at a top but I have seen price decline further during a panic) Understanding the buying vs selling at these particular bars can be useful in my opinion.

[TinGull]

Analyzing the number of contracts at the bid vs the ask is extremely helpful in seeing the pressure being taken off or being applied. Notice on this chart, the 5th of january, you can see very quickly the buying pressure being released and selling coming in as we retrace to pivot levels. This shows you that there is not going to be a rejection at that pivot, and we will continue in the way of the trend.



Also, you can see that as it hits an extreme reading going in the direction of the mini trend, we are watching for a reversal due to exhaustion in that direction.

My graph is plotting the number of contracts at the bid vs ask, not the up ticks vs downticks.

[walterw]

Hi Tingull, how do you establish this extreme levels ? thanks Walter.

[TinGull]

Those were levels I observed very early on with the YM noticing that when there was a net difference of over 290 contracts or so in either direction, a turnaround happened.

[mjp]

Thanks to Soultrader for aggregating this category of indicators in one thread. And for placing the several contributing thread links in the first post. I earlier had spent time going through all the threads/etc looking for all the references to these types of indicators. Helpful to find them in one place.

[walterw]

Ok guys, I think we all need to understand what our formulas are all about and I even have my doubts about how they are really working in terms of ticks or volume delta really...

First of all Tick Delta and Blue ray up /down volume are the same formula, same data in consideration, the only diference is that tick delta will show on the top of the histogram the most traded one... its just diferent visual of the same thing....

Now what is the tick delta showing ?... well its a simple volume histogram, same as volume indicator...(its taking into acount volume data) if you put your volume indicator below tick delta you will find that both look exactly the same... the diference is that tick delta is asigning (up or down ticks) to x volume... and here is my great question.... we are dealing with volume information here and not tick information... if the histogram would only consider up/dn ticks without distinguishing volume... every histogram bar would end ( lets say in a 233t chart) with 233 reading...
So I really have my doubts if we are dealing here with a tick delta or if we are actually making some sort of volume breakdown....
I attach an example.... cheers Walter.

[Blu-Ray]

Your dead right there Walterw, I was just responding to a request from James when I noticed that all the indicators produced the same results ie volume and not ticks.

Then I've just come across your last post and as you say both indicators are displaying exactly the same info, it would therfore be down to whatever suits the individual.

I've just downloaded your TickDelta indicator so I'll give it a go in real time tomorrow, because I was wondering if the colours kept swapping intrabar.

Cheers

Blu-Ray