It might be a useful proxy but I have my doubts. It assumes that when someone buys aggressively (@ask) that it is because they are adding inventory and that when they sell aggressively (@bid) that they are reducing inventory or increasing 'short inventory'. Personally I think that's a bit naive. I am not saying that cumulative delta isn't a useful indicator just that it might not be a good proxy for open interest/inventory.
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100% agree with you, that's why I a bit careful about delta stuff, and that's why the same way careful about just counting bid/asks, but there is somewhere answer, it's just need to be found. That's is thing I'm thinking about.
However I've noted, I'm checking that now, but daily 0 delta level sometimes quite important.
So, any comments/suggestions about above are more than welcome.
- I don't use trendlines. It's like fibs. A self-fulfilling prophecy. I only pay attention to them to have an idea of what other people will do (and potentially fade them). I think horizontal S&R is much better. It's based on specific prices.
- I suggest rephrasing what you wrote in terms of supply & demand. The market "must" do nothing and we must not force our will upon it. Instead of saying
"the market must go down"
say "supply overwhelmed demand so the market will seek out more demand"
it's subtle but really crucial to understanding price action.
other than that, you got a good read on the market there. now see if you can do it realtime!
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I knew on the first high volume down bar that there was a good chance of a reversal. Whenever you have high volume it means a lot of traders were taking the other side. Now if price is going down, who would have the balls to be buying?
Also we do NOT need increasing volume for price to go up. That's a myth. We only need more demand than supply. that's it. a few 1 lot traders can make price go up if no one wants to sell.
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