Below the volume charts in our trading room charts, we plot the delta of the bar. Earlier this week we did a revision in the way we look at this delta.
Here is a 5 min chart showing the Price, volume, and 2 delta panes which show the difference.
The delta is the difference between the buy (ask-traded) and sell (bid-traded) volume of each bar. Positive deltas signify more buying pressure, while negative deltas signify more selling pressure. The magnitude of the delta determines the strength of that pressure. Expect to see positive deltas during uptrends and negative deltas during downtrends, but look for delta turning negative at highs, or turning positive at lows…a sign of possible market turns and good entry/exit points.
The difference in the charts and the two panes of delta is that we are representing delta in a candle stick format. This format allows us to see the displacement of the high or lows and could be useful to gauge the strength of a move especially at turning points or at high volume spike zones especially near vwap bands or vwap.
In the example plotted above, one can see the 10.05 bar of the delta ( last pane) pull back from the lows and the next bar is a full green bar telling us that there are buyers showing an interest in the auction as the price probes lower. This sets us up to watch the OrderFlow of the 30 minutes and full day more carefully for buying confirmations.