Wednesday, April 01, 2009

Market Delta and Graphics That Can Aid Decision Support for Traders

In coming posts and tweets, I will be highlighting some useful trading tools from the new version of Market Delta. For example, take a look at the multi-pane footprint chart, which allows you to compare volume at offer vs. bid for two related stocks, ETFs, or indexes. This is especially helpful in tracking leading relationships, such as occasions when financial stocks or small caps are leading the movement in the S&P 500 large caps. You might see selling coming into the leading sector, giving you a heads up on possible weakness in the stock index you're trading.

Another valuable feature is the ability to track volume patterns that set up *within* bars, enabling you to see where large traders are participating in very short-term strength and weakness. This idea of tracking market behavior within bars is potentially powerful, because much of our implicit feel for market patterns is generated by our sensitivity to what is happening at one time frame shorter than the one we're trading. (This last sentence will deserve a blog post in itself).

In other words, it's not just what happens in a market during a given unit of time, but *how* it happens that makes all the difference for the trader. It is the path connecting open-high-low-close that provides us with our feel for market action. Graphics that reveal the path and still keep the trader connected to the larger time frame are potentially quite valuable as learning tools. I'll be exploring some examples shortly and eventually including them in the intraday Twitter posts.