Welcome to NexusFi: the best trading community on the planet, with over 150,000 members Sign Up Now for Free
Genuine reviews from real traders, not fake reviews from stealth vendors
Quality education from leading professional traders
We are a friendly, helpful, and positive community
We do not tolerate rude behavior, trolling, or vendors advertising in posts
We are here to help, just let us know what you need
You'll need to register in order to view the content of the threads and start contributing to our community. It's free for basic access, or support us by becoming an Elite Member -- see if you qualify for a discount below.
-- Big Mike, Site Administrator
(If you already have an account, login at the top of the page)
Is big lot vs small lot delta analysis still relevant is ES?
I'm trading mainly ES and still working on my charts setup and what studies to apply, that would give me some meaningful information
Can you tell from your own experience how useful is analyzing cumulative delta separately for small and big transactions?
Now I'm testing setup with CVD separated to 1-10 lots and more than 10 lots
Sometimes interesting things show, that I could interpret something like "smart money is selling to the dumb money". But most often the picture is not as clear
Is it naive to believe that looking at separate deltas give you any piece of edge these days?
Large players have all means to hide their larger transaction and for instance instead of buying 1000 lots in one order or even iceberg order, they can give instruction to their HFT algo to buy 1000 one by one, separating each order by some time
What are your thoughts on this topic?
Additionally can you check if my analysis on the attached chart makes sense?
If you were filtering for say one hundred lot orders then I would say that large orders are probably being broken up in to smaller sizes. But ten lots is still small for the ES and small compared to the amount of size a large trader would probably be trying to fill. So I would think of it the other way. What constitutes a small retail order and I think the majority of retail traders are probably trading ten or less and anything more than a ten lot would be considered reasonable size for a retail person trading from home.
Therefore your two filters are useful in that one shows the small retail trader and the other shows 'serious retail' and upwards that have the money to be trading anything above ten lots, without having to try and guess an exact number for large size.
As far as Cumulative Delta goes (which I don't use but have looked at), your first two notes suggest you are trying to compare the two graphs on a bar by bar basis. I don't think that will work with any consistency. I think you would be better to use it more as a general guide to sentiment, like the last annotation where large lots are selling compared to the small lot traders suggesting that the uptrend is likely to run out of steam so you don't want to chase a trade, or add to a profitable trade, but might want to look to exit some on further pushes up, look out for exhaustion rushes upwards etc. Or if looking for a short, start focusing on further pushes up that fail to go as potential opportunities to sell....
Easy with hindsight on a single graph of course Not an expert on anything, just my thoughts.
You do not win as a trader, you just get to play again the next day. If that game doesn’t appeal to you then you should not trade. Gary Norden
I'm still looking for a good chart setup, that will help me read the story that the market is trying to tell us. Recently I learned that "reading the story" attitude is a game changer. At every moment I try to understand what the market is doing. Very often it's not clear and when I can't tell what is happening then I simply don't engage. I've discovered that not engaging in such situations help me reduce losses.
Other times situation it's quite clear, and I'm looking for my charts to help me see what's going on.
Take a look at yesterday's micro flash crash chart on covid vaccine test flop and my comments. That's how I read this situation adding retail/large lot CVD analysis
Of course it's my own analysis and how I see it. Probably some market specialists can see this absolute differently
I'm not sure if you are asking about the lower panels below price bar chart or about what's on the bottom of the screen.
Bottom of price bar chart - solid red line is VAL (Value Area Low), yellow dotted line is Math Lines Indicator, green is POC, white line above my cursor is the low of Convergent Trading Stalk Zone.
Below price chart, those two separate panels. There is CVD = Cumulative Volume Delta, upper panel with "Retail panic" is CVD filtered for trade sizes 1 to 10 lots. Lower panel is CVD filtered on more than 10 lot trades
I actually know a pretty successful ES trader and he uses a similar setup. He divides CVD into 3 sizes: 1 lot, 2-5 lots and 6+ lots, reason being is because that is how the volume is divided on ES: 1/3rd is 1 lot, 1/3rd is 2-5 lots and 1/3rd is 6+ lots. So, to answer your question, you can absolutely use this indicator to see what dumb money vs smart money is doing in the market but it needs to be used in combination with other parameters to determine an bias and take a trade on the market. Hope that helps!
My own experience of CVD is that sometimes it gives a clear picture on order flow and likely direction of price, aaaaaand sometimes it doesn't..
If it's any help, using the example of your chart, I would analyse it like this (and probably did at the time).
The first thing is to understand the fundamental reason why the market moved lower. So was it a) a technical move (trapped/exhausted buyers etc) or b) price moving to new areas based on new information that means previous higher/ lower levels are now irrelevant due to this new info.
In real-time, this situation would probably make you think it is scenario b). This is important as you would not really be looking for a long. If it was scenario a) then you might be looking for longs as the market has moved too far from a price where people agree is fair/accurate ( overbought or oversold) and therefore price would have a good chance of snapping back.
So you're in scenario b). Fundamentally bad news has moved markets lower. This means there is little to no chance that price will reach the levels it was trading at before this bad news. So you're looking to enter short, and you're looking for an area and a signal to enter short.
What your delta is telling me is this. There are lots of people buying and yet price isn't moving higher. So all that buying is being absorbed via limit orders which don't show up on the CVD.
Allied with your fundamental view of what the market is doing in terms of price then you can look for an entry short, as the absorption of buying shows you that large hidden sellers agree with you and are soaking up buying efforts.
Of course you could have picked scenario b) when it was actually scenario a) and that would make things a bit different. That's the wonder of trading I suppose
Edit-I should add that when I'm talking about seeing lots of buying on CVD and it being absorbed by limit order sellers, I am talking about the large lot size CVD. You can aee thiere is lots of buying and price is still very low. This does not show up on the overall CVD.
I'm going to do some analysis of the large lot sizes and see if this is a one off blip or something a bit more reliable to trade with as it's a great sell signal in this instance.
Not an expert on anything, just my thoughts.