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understanding SC cumulative delta studies
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understanding SC cumulative delta studies

  #1 (permalink)
Trading Apprentice
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understanding SC cumulative delta studies

Sierrachart has 2 different cumulative delta studies:

1) Cumulative Delta Bars - Volume
2) Cumulative Delta Bars - Up Down Tick Volume

1) is the diff b/w bid and ask volume. I think it's safe to say 1) is what we're mostly thinking when we hear the term "cumulative delta."

2) is the diff b/w uptick vol and downtick vol.

I have read the documentation and understand how it is calculated. What I need help on is trying to understand how to interpret 2) in relation to 1). I don't understand why anyone would use 2) which makes me think I'm blind to the significance of calculating delta via uptickvol-downtickvol.

Why would anyone use updown tick volume cumulative delta? Is it mostly used in spot forex where there is no bid-ask volume data?

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  #2 (permalink)
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One reason to use the Cumulative Delta Bars - Up/Down Tick Volume study it to get a more accurate representation of the cumulative delta of the ask/bid. This discrepancy occurs when the data provider does a poor job of recording whether the trade occurred at the ask or the bid.

In the pic below, the upper panel is the Cumulative Delta Bars - Volume of IQ Feed data.
The middle panel is panel is the Cumulative Delta Bars - Volume of Trading Technologies data.
The lower panel is the Cumulative Delta Bars - Up/Down Tick Volume of Trading Technologies data.

Note the similarity of the upper and lower panels, and the dissimilar middle panel.
I used an extreme example to make a point but since IQ Feed is known for it's ask/bid accuracy, using the Cumulative Delta Bars - Up/Down Tick Volume study is a way to overcome poor ask/bid accuracy.
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  #3 (permalink)
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canoe View Post
Sierrachart has 2 different cumulative delta studies:

1) Cumulative Delta Bars - Volume
2) Cumulative Delta Bars - Up Down Tick Volume

1) is the diff b/w bid and ask volume. I think it's safe to say 1) is what we're mostly thinking when we hear the term "cumulative delta."

2) is the diff b/w uptick vol and downtick vol.

I have read the documentation and understand how it is calculated. What I need help on is trying to understand how to interpret 2) in relation to 1). I don't understand why anyone would use 2) which makes me think I'm blind to the significance of calculating delta via uptickvol-downtickvol.

Why would anyone use updown tick volume cumulative delta? Is it mostly used in spot forex where there is no bid-ask volume data?

It does not make sense to look at both uptick/downtick volume and bid/ask volume in parallel. In fact the uptick/downtick volume method is typically viewed as an approximation of the bid/ask method.

Historically with NT7 (not sure about SC), the bid and ask traded volume was not available in an orderly fashion. The reason was the time stamp granularity of 1 second that was imposed by NinjaTrader, so it made it impossible to synchronize order book data with trade data.

This resulted in the bid and ask traded volume only being available in real-time. You would need the chart to fill with live data until a sufficient number of bars was available but everything would disappear again when pressing F5 or adding a new indicator. Again, I am not sure about SC.

Therefore the uptick/downtick with continuation method was used, which allowed approximating the genuine delta by using historical / real-time data. The uptick/downtick continuation is between 75% to 85% accurate, which is probably good enough for trading.

You can therefore either use the uptick/downtick with continuation method (requires trade data only) or use the bid and ask traded volume method (requires both trade data and level 1 order book data)

The two methods should not be used together as there is no benefit, just adds to the confusion.

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JonnyBoy View Post
It does not make sense to look at both uptick/downtick volume and bid/ask volume in parallel. In fact the uptick/downtick volume method is typically viewed as an approximation of the bid/ask method.

Historically with NT7 (not sure about SC), the bid and ask traded volume was not available in an orderly fashion. The reason was the time stamp granularity of 1 second that was imposed by NinjaTrader, so it made it impossible to synchronize order book data with trade data.

This resulted in the bid and ask traded volume only being available in real-time. You would need the chart to fill with live data until a sufficient number of bars was available but everything would disappear again when pressing F5 or adding a new indicator. Again, I am not sure about SC.

Therefore the uptick/downtick with continuation method was used, which allowed approximating the genuine delta by using historical / real-time data. The uptick/downtick continuation is between 75% to 85% accurate, which is probably good enough for trading.

You can therefore either use the uptick/downtick with continuation method (requires trade data only) or use the bid and ask traded volume method (requires both trade data and level 1 order book data)

The two methods should not be used together as there is no benefit, just adds to the confusion.

For eurusd and other spot fx symbols i see a big difference between cumulative delta up/down tick bars and cumulative delta volume bars. But the latter one seems to match the corresponding CME futures symbol (E6) more closely. Perhaps that indicates its the more accurate one?

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