Delta

Delta provides traders with the total sum of market orders in any given session.

Experienced traders understand that only market orders move the price action. This is referred to as Active or Aggressive Order Flow.

Conversely, limit orders when filled do NOT move the price action. Institutions and traders with large positions may often choose to sell via limit orders, to avoid influencing the price action in the market.

This is referred to as Passive Order Flow.

Active and Passive Order Flows go hand in hand, if no one executed an active/market order then the price would never move.

A passive/limit order requires an active/market order to fill it.

By now in your trading journey, you should understand that limit/passive orders are not guaranteed to be filled, and market orders will automatically fill on execution at the current market bid-ask price.

It is the market orders that are moving the market, so Delta in its essence, reveals whether buyers or sellers are in control throughout each candlestick.

Time Stamps

1:04 – ZEC Previous COTW (DO NOT TRADE THIS)

10:50 – DELTA

• Delta is very important to understand
• In trading, there is
• Passive order flow = limit orders (they either get filled or don’t)
• Active/aggressive order flow = market orders (you get filled 100%)
• For a passive order to get filled you need an active order to fill it. The market only moves from market orders, if nobody ever placed a market order the market would stay still and not move.
• Delta is the sum of aggressive trades. It shows us who was in control during that candle. It is either positive or negative.
• Delta = buys – sells
• You can literally see delta for every 0.5 dollars in a candle and at the bottom of the chart, there is the overall delta for the whole candle.
• A candle can be green while delta is being negative or the candle can be red and the delta positive – there are also inverse correlations and strategies
• Two key questions to ask yourself when wanting to trade:
• What direction is the market trying to go?
• See the MS on a HTF
• Is it doing a good job in its attempt to go that way?
• From a delta and volume perspective: knowing that market moves from active orders if the price moves higher than we would want to see the volume amount of active orders also increasing.
• If that is TRUE the market is doing a good job in its attempt to go that way
• If FALSE and price is moving up with a decrease in active orders (positive delta) it is not doing a good job and likely will reverse.

24:40 – DELTA CLUSTER

• Delta clusters show us areas on the chart with high delta. If we see an area on the chart with a high delta concentration we could expect the price to revert there if revisited.
• Daniel gives a good example.
• If price passes through a high delta cluster a few times it is not relevant anymore.
• Daniel is mostly looking at these delta clusters more at the highs and at the lows, they should be untested
• As the price breaks out of the range you want to see a positive delta (and volume) increasing as it shows you new money is coming in to buy at these levels and that will support price when it breaks out.
• Breakout on low delta is considered bearish as price is moving up with less interest from active buyers and it is more likely price will return back to the range (SFP is possible)
• So, moving up on low volume is possible but is a ‘red signal’.
• Delta helps to confirm a breakout instantly. Daniel loves to trade using delta and OI to see when price approaches low/high is this likely to be a fake-out/SFP or are we going to see follow-through.
• If price breaches a high and the high is taken on a large delta influx along with the NET longs increasing Daniel would not short the break but he would market buy with strength. Bid/ask profile should look like P with then follow through taking the high.
• The advantage of this is we don’t have to wait for an arbitrary 5 minute close / 15 minute close above the level. We can see the delta straight away is supporting the breakout and react in seconds. Waiting for a 15 minute close for instance can result in a trade missed.
• The reason we want to see an increase in positive delta when we break a high is that it shows we have more active buyers coming into the market to support price.
• If price breaks a level on high volume but on negative delta, the fake-out sign can be confirmed if the price comes back into the range with an increase in negative delta, volume, NET shorts and OI increase.

50:13 – DELTA RANGES

• If the high of the range is reached and the delta of the buys falls off significantly then it highlights buyers are not interested in buying this high and it is more likely to remain range-bound and come back lower.
• If the low of the range is reached and the delta of the sells falls off significantly then it highlights sellers are not interested in selling this low and it is more likely to remain range-bound and come back higher.
• Generally, when the price is range bound we will see active selling increase at the top and active buying increase at the bottom. If this does not occur, and then price breaks out of the range on increasing delta it is likely to get follow-through (especially if OI from both sides is built up during the range).
• If the price is ranging and the lows are getting bought up with a strong positive delta and the highs are not aggressively sold we can say this range is more likely to break upwards.
• Delta is a very important statistic when trading a range. It gives heads up if it is ‘wise’ to short the range highs or buy consolidation under resistance. Likewise buy the low of the range or short consolidation over support. There have to be at least two rotations to decide so. CVD helps a lot.

1:03:34 – Q&A

• Sometimes it can happen that the highs of a range are being sold heavily but then the price starts consolidating under resistance and then takes the high on an increase of positive delta and breaks out. CONTEXT!
• A high volume cluster does not mean that this is the POC of the day, POC can happen any time in a range but if it does that is another level of confluence.

1:22:05 – BTC TA