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Understanding futures market ( delta , time and sale )
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Understanding futures market ( delta , time and sale )

  #11 (permalink)
Energy futures Superfreak
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I dont know. there could be some differences in CME products depending on MDP 3.0 vs bundled. I dont have access to both to run a comparison. My hope is that it wouldnt be too different on appropriate time frames (such as what i posted), but may look wildly different on a volume based BvA/Numbers chart, or a fast 300 tick chart. Ive watched it for many years on a number of different products, platforms and data providers, and they have all had about the same character and behavior on 3-5min bar timeframes.

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  #12 (permalink)
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@voluma I think its a great question..

I think @hobart has given a good explanation and ties in OF & nuances of how it is done. @hobart thnx.

Its what happens during and after the markets hit which causes the ebbs in OF and how participants react or capitulate which hobart described. Also the way in which the market orders are generated. Its not that i understand all of it... but its the key to markets....

cheers n only good luck...your questioning mind is on the right track
s



hobart View Post
First,i think your answer was tailored to the experience level of the original poster, and is a good simplification. i wanted to add to it with the delta piece

in context of "delta", there are three scenarios

a) MKT orders hitting the other side (causes delta to increment)
b) LMT orders hitting the other side (causes delta to increment)
c) MKT orders unable to locate a counterparty, and have to look to a new price level (extending range by a tick, causes delta)

In this screenshot, the top pane is price, the bottom pane is a standard cumulative delta. What makes Delta interesting is that in exhibit 1, you can see a strong imbalance of scenario A and C, causing delta to shoot wildly down. Call it an exhaustion climax, a successful stop run, often key reversal points look like that, when 'two sided' trade breaks down. In exhibit 2, i think that is what makes people think delta is such a powerful tool. you see descending price action, which leads you to think sellers are hitting C, when in reality, those are buyers AND sellers just taking profits and adding to positions on LMTs. The delta continues to creep up, which in hindsight correctly "predicted" a high probability of additional buying to break out above the pullback/range/consolidation price action. Good luck trying to interpet that at the time watching a 3k volume chart and a cum delta chart on ES and CL during cash hours can SOMETIMES give you pretty clean hints of what may happen next. outside of cash hours, its very uncorrelated. imho delta is very difficult indicator to interpret, and is best ignored by traders without intimate knowledge of order flow in THAT market.
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  #13 (permalink)
Market Wizard
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Answer
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voluma View Post
I've new to futures trading and been trying hard to understand the theory behind it. I've read few article from the web and it mentioned that futures market it's a place where buyers and sellers meet in order to transact. For every buyer, there is a seller and for every seller, there is a buyer. If this statement "For every buyer, there is a seller and for every seller, there is a buyer " is true , i would like to know why there is a delta difference for each candle ( chart type in minutes) . If each price level got transaction between each buyer and seller, the delta should be remain zero.

Apart from it, i'm also finding it hard to understand time&sale print. Assuming i'm buying 5 contracts and there's seller willing to sell to me. Will the T&S print both 5 contracts buy and 5 contracts sell together at T&S ?

Hope some of the senior here could give me some guidance. Thanks in advance.

I think it's easier to explain with a footprint chart.

a delta can be seen on every single price level. in my example we look at the transaction at 1,922.25. at that time the market was 1,922.00 (bid) to 1,922.25 (ask). a marketable order (marketable orders are either market orders, or buy and sell limit orders whose limit price is at or above/below the current market price. A marketable buy limit order would have a limit price set at or above the current ask in the market) was executed at the offer (1,922.25). meaning a buyer of 3 contracts hit a limit order at that price. now we have a buyer of 3 contracts and a seller of 3 contracts. same amount of buyers and sellers. but since the transaction happened on the offer (ask), we now have a positive delta of 3.

of course you can also analyze the delta of candles, the whole session etc, whatever you want to.

time & sales also reports a buy of 3 contracts at 1,922.25 at around 16:15. again we need a marketable order to hit a limit order to have a transaction.

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  #14 (permalink)
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good explanation Silvester17.


and how is possible that the delta(at candle end) is negative and the candle end bullish.. and viceversa??
In this case... limit orders at bid (passive buyers) are more strongest than sellers (market orders. aggressive sellers) ??

thanks

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  #15 (permalink)
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jossfx View Post
good explanation Silvester17.


and how is possible that the delta(at candle end) is negative and the candle end bullish.. and viceversa??
In this case... limit orders at bid (passive buyers) are more strongest than sellers (market orders. aggressive sellers) ??

thanks

yes, exactly. it's called a delta divergence. many times this happens at a swing low (your example) or a swing high. not a entry signal one can take blindly, but still a pretty interesting piece of information.

there're various indicators to help recognize the divergence. like this one here:

https://futures.io/elite-circle/12682-volume-alert-indicator-14.html#post374089

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