Thursday, March 06, 2014

Using Market Delta to Visualize Real-Time Market Sentiment

As noted in previous posts, I particularly like unique and effective visualizations of market data.  One of the tools I've appreciated in that respect for a number of years has been Market Delta.  The above chart was lifted from my archives; it is a great visualization of a breakout trade.  Note how we were trading in a relatively narrow range before significant volume came into the market.  Inside the bar, you can see the volume transacted at the bid vs. offer price as a way of identifying whether sellers or buyers were dominant.  In the breakout trade, you can see that the increase in volume (bottom histogram) was occurring with trades dominantly hitting bids.  A trader who picks this up early can ride a nice move until volume comes more into balance (side histogram).

I see that Market Delta has developed new ways to make it easier to read imbalances in buying and selling pressure.  There is quite a bit more material on using the tool on their blog.  It's a great way of assessing trader sentiment in real time.

Further Reading:  Reading Market Delta Charts