FulcrumTrader

If you are going to trade the ES, YM, or TF, then definitely learn to watch the NYSE TICK for BUY and SELL program activity. Just watch how those three futures instruments react to the BUY and SELL programs running during the US cash session hours.

At times throughout the day it can be as low as 30% of their DIRECTIONAL trading through limit order entries. All in all, we had a good conversation here and everyone can now go running off in their own selected directions - don't you just LOVE that FREEDOM!

...and the exact reason why I choose that video...good for a laugh. Now in no way do I think "those people" are scary, it is just kind of funny to listen to that type of approach in trading...LOL!

Every single question you presented here was exactly answered in my prior posts - attention to detail is key (go back through my last few posts and make sure you know what I am saying). Again, regardless of futures market the large Commercial participants have at times throughout the day up to 70% of their DIRECTIONAL TRADES with MARKET ORDERS. And again, yes I have friends who do trade within large Commercial participant firms so I know (and have vetted my method of tracking Delta) in detail how they run their liquidity. If you want to track the DIRECTIONAL traders game, you gotta be watching the market order driven flow (limit order activity is frequently covers, market makers action, hedging, retailers, medium and smaller participants action, etc.).

If you actually listened to the guys comments in the video it should have been VERY obvious it was a joke - COM'ON MAN!

Now if you want a really in depth way to trade the markets here is something you can all debate about - [ame=http://www.youtube.com/watch?v=nD8aHk-C4lY&feature=channel_video_title]$6010 Profit on Gold and Silver Futures Trading in 25 Minutes - Nov 17 2011 - YouTube[/ame]

If you track and know where levels of price are tied to levels of remaining held inventory, I find it a logical and simplistic process to learn when increased covering or increased newly initiated activity is taking place (as a person builds screen time the first few weeks they really focus on tracking Cumulative Delta). Breakouts, failure to breakout with return back into range, heavy covering, chop, etc, are all patterns that you can learn in Delta/price action. When you can actually see the order flow patterns behind some of the crazy price action, the markets will start to make some sense.

In all of my various webinars, I have always stated exactly what I have been told by those who trade within large liquidity participant firms - "the predominance of large liquidity participants directional trade is with market orders" I have never said all of their trade is with market orders...that would just not make any sense. The primary order type that most Commercial trading entities use for directional trade is market orders...this can run as high as 70% of the large liquidity participants directional trade order flow throughout the day.

Using Cumulative Delta as my primary mechanism to target trades, I run about 90% of my entries with "limit" orders. Also, when a trader can completely understand what is actually taking place during an Inventory Grab (both minor grab within the Delta Volume Distributional range or a major grab on the edges of a Delta Volume Distributional range) it can really help you hit a bunch of very high probability trade action throughout the day. When available supplies of held inventory capitulate and let go...that means something. Commercial participants use the runs of capitulation to cover into (winner profitable covering into a loser letting go) and price frequently reacts to this action (pivots in price - price changes direction as newly initiated directional trading comes in after Inventory Grabs - this happens a lot in all instruments day after day). BTW, instruments like the CL, DAX, some of the Ag's are amazing after Inventory Grab action - I love trading the CL and DAX because of this alone. Remember, when a large liquidity participant gets into the market, with newly initiated directional trade, they already want to know where there are potential exits (the price levels they see where held supply was initiated and not yet neutralized - areas of resting supply is one of the things they track all day long - they always want to know where there are optimal exits - areas where they can cover with the least amount of negative slippage while unloading large position size).

Large Delta bars are usually a sign of a lot of covering activity, so if your in some good trend following action it is great when large Delta bars keep printing. Large Delta bars will take place when there is a solid breakout of a range, or price runs to new highs in a rally or new lows in a downtrend (big Delta bars is a sign of breakout strength - triggering heavy covering action). I also know a 7 figure acct trader group who are using a zig-zag feature on both price and Delta...they have found some ratio's of price movement to Delta movement that are a very good signal for their trades. When they first showed this pattern to me I was like, "I'll be darned" and that was a really good find on their part. For tracking the activity of the limits I use the Cumulative Uptick/Downtick. When delta and uptick/downtick are in alignment you will get linear price movements (a lack of resistance to the market order flow). When delta and uptick/downtick are not in alignment price movement tends to cycle (or chop)...you are watching limit order activity absorbing market order flow (resistance to the market order flow).

Fortunately, the futures markets are all orders on one exchange for all to see - so no one can really hide what they are doing. As all the large liquidity participants (and retailers) are running their order flow, you can see it live tick by tick. The Cumulative Delta is just a simple mechanism to visualize the differential in the BID/ASK order flow (market order activity). Too see who is in control of the order flow moment to moment - BUYERS or SELLERS. Too bad all the Forex interbank activity could not be put on one exchange for all to see - oh wait, that would kill their racket...LOL!

The COT report is frequently inaccurate at providing hints towards structural moves in an instrument - and that actually does not surprise me. Newly initiated trade open interest (positions not yet closed) is absolutely a component of price movements. When price leaves one level and trades to another, there was definitely newly initiated inventory (open interest) as a component of the price directional change and continuation (to the next level). The predominance of directional trade by large liquidity participants is through market order driven order flow - the tracking of this order flow and the price levels where order flow changes took place (to change the direction of price) are created with newly initiated inventory (open interest). If you are tracking the Cumulative Delta your are tracking ongoing organic open interest (always changing - the ratio of those holding SHORT positions in relation to those holding LONG positions). Of course Cumulative Delta will never tell you exactly how many contracts are held "open" at any moment of time, but that is not needed. All I need to see with Delta, is where order flow bias created changes in the direction of price - to see where (the price levels) the change in the ratio of the held open interest was affected by newly initiated trade. I am not tracking the expansion or contraction of the overall open interest, but the ratio of those holding open SHORT inventory to those holding open LONG inventory - this ratio does change as the market trades up and down day to day and that is the key. In my over 8 years of tracking Delta and working through this order flow tracking process, with my friends who trade within firms in Chicago, it is the ratio of the open interest that I want to follow. Also, the price/delta levels where obvious newly initiated directional trade caused the directional movement of price (price changing directions or the pivot points of price activity throughout the day) are the other critical items to track (what I call Delta threshold levels - turns in Delta that align with pricing levels). There is a reason why commercial participants track the levels of price tied to turns in the BID/ASK differential (Cumulative Delta) - so they can see areas of price and what possible supply may be held there as open inventory. When a large liquidity participant is working new directional trade order flow into the market, they already want to know where there are possible exits (price areas where held open inventory was initiated - these are seen as areas of supply that may be used to cover into for their trade - or what could be called potential profit taking supply zones, where a winner can cover into a loser without a lot of slippage). I could go on for another hour about how Commercials track order flow / open interest and why, but in the end everyone has to form their own opinion. All I can say is, try to establish contacts within the large liquidity firms and you will be fascinated by how well they play the order flow game.

You can track Delta as a standard feature within the following charting programs with the one well proven feed of DTN.IQ; Inv RT Pro Marketdelta Sierra Charts

Actually, I am not a vendor...I do not own or run FulcrumTrader site as of the transfer to THD months ago (TradersHelpDesk has full control now). Also, you are off in your example of open interest tracking and we don't need to see what exactly every order was (opened new position or closed held position). It is a known absolute that price will not leave one price level and rally to levels 5 points above on a bunch of selling bias. Understanding the mechanism that takes price 5 points higher is the critical component - which is built upon SHORTS buying to cover and newly Initiated directional LONGS. This is all I need to know, so when price makes obvious to see directional changes, I know there was newly initiated directional trades as a component of the order flow bias - which at a specific pricing level changed the direction of price (newly initiated directional open interest - and the pricing level where the newly initiated activity started). You have to also understand how commercials carry their directional held inventory bias from one contract to the next (leading up to and through the rollover period). I can see every price level where there was an obvious component of newly initiated directional trade to change the direction of price (MICRO Open Interest tracking). I can see the upper most and lower most levels of a price range, where at some point order flow bias (with newly initiated directional trade as a component) changed the direction of price back into the range (MACRO Open Interest tracking). With Delta tracking, I see the outer edges of the volume distribution - from the first day a contract trades to the last - the highest and lowest levels of price, where indexed Delta levels, at the shift in order flow bias drove price back into the previous range (where obviously newly initiated trade was a component of the order flow bias shift). Again, this is MACRO Open Interest tracking or seeing when futures instruments are at the edges of their volume distribution and extreme out of balance. Large liquidity participants track order flow and open interest, not to see exactly what each and every single lot order was for (BUY, SELL, BUY to cover, SELL to cover). No...they know the exact components of the order flow bias that creates price movements (the constantly repeating order flow patterns that drive price). They also know from tracking the order flow bias, off each and every turn of price day to day, when a market has too many participants SHORT in relation to not many participants LONG (out of balance open interest in a down trending market or just the opposite in an uptrending market). If you get a chance to spend time with those in large liquidity futures trading firms, you will be able to get some insight how they use BID/ASK differential analysis.

Large liquidity commercial participants constantly track order flow and open interest, so I do too. Unfortunately, price action alone will never tell me when a market is completely out of balance from an open interest stand point (Major Inventory Grab - one of my best position trade set ups). Price action alone will also never tell me when accumulation is taking place at realtime tracked price levels (Delta Divergence). Price action alone never lets me see trapped over committed inventory in a localized area of price (Hidden Divergence). Price action alone will never tell me when commercials are just moving price down 2 points quick, so they can buy more at that very temporary lower price level (Commercials are always moving price around to their advantage). There are many things I would never be able to see if I was stuck with price action only trading - no thanks.

The CME has still not completely broken down all the order flow in their reporting. Apparently, they do not feel the existing data infrastructure can handle the flow of data from a complete break down to the most granular level. It makes total sense why large liquidity participants continue to spray very small lot order flow into the book (up to 950 single lot orders sequenced together in one second)...this is by far the most dynamic way to work liquidity into order flow activity they want to take advantage of. This is also to this day the best way to mask their entries/exits from the market (versus sitting in the book with limits). If a trader has a complete understanding of Cumulative Delta Volume tracking, you will see bursts of order flow activity frequently at key held inventory levels. This is activity of a winner covering (spraying market orders) orders into a loser capitulating (bailing with market orders). This activity causes order flow transitions, as buyers lose control to sellers or sellers lose control to buyers - which we can see very easily through Delta candlesticks. We also see large liquidity participants market order flow sprayed into the market as a new directional trade..into others who are capitulating a level of held inventory (losers bailing with market orders). The dynamics of efficient order flow tracking are a foundation of the commercial participants heavy market order flow directional activities. They see exactly when others are capitulating, and this frequently triggers their extremely fluid order entry actions. This is mili-second tracking and order entry precision that most all retail traders have never been exposed to. This is also the main reason I use Cumulative Delta Volume tracking as a means to see where open interest is at realtime (when is the market going out of balance, when are levels of held inventory holding or folding, and what pricing levels still have held resting inventory - or real support and resistance).

Trading 1:1 R:R set ups is an exercise in futility (especially live when fills for entries and exits can have slippage from the signal entry price location). Goldman can trade this stuff because THEY have the LIQUIDITY to juice the market in their intended direction to get a HFT trade target - most retailers don't have that luxury.

PROX Bars charts for comparison; .75 Renko charts - Images | ChartHub.com 4,000 contract equal Total Volume candles - Images | ChartHub.com 4,000 contract equal Delta Volume candles - Images | ChartHub.com I ONLY use DTN.IQ feed for all my PROX Bars and Cumulative Delta charting (the only feed that keeps passing all my BID/ASK data testing). I tend to use a 1.0 Renko for my "ES" HTF chart and .50 Renko for my Entry chart. BTW, looks like Trendscalping site will have PROX Bars ready in Sierra Charts by the end of next week (right now only in Inv RT Pro / Marketdelta charts).

The testing is ongoing and I have not heard any new update for Esignal that changed what we were seeing before......if you do BID/ASK Delta work go with DTN imo (and get exchange fee waivers through various futures brokers).

I have a group I work with for building automated trading systems who has Bloomberg feed and they do continual testing of feeds. At times Esignal will not match DTN.IQ feed so we never use it....and this is odd since Esignal should be using a ticker plant with proper formating of the BID/ASK data.

I have tracked the Cumulative Delta (BID / ASK differential) in futures for over 8 years now. I mainly use Investor RT Pro connected to ONLY DTN.IQ feed for my main Cumulative Delta analysis. What my group has found the past years is DTN.IQ feed is the only BID/ASK data we trust (only feed that consistently matches Bloomberg feed in a wide range of futures instruments). If you have additional questions about BID/ASK data let me know. We are not yet finding any of the broker supplied feeds (Rithmic/Zenfire, OEC, Transact, IB, TT Fix, etc) workable for reliable BID/ASK data analysis (in a wide range of futures instruments ---> ES, YM, TF, ZB, TY, CL, Gold, Silver, NG, DAX, etc,etc,etc).

....and for this reason I pay attention to the Cumulative Delta AND Cumulative Uptick/downtick (of trades....NOT of volume). Both of these items are logic inputs to the PROX Bars....... [ame=http://www.youtube.com/watch?v=R3mBP6JVna8]‪PROX Bars Basic Intro (logic based price bars)‬‏ - YouTube[/ame]

BTW, the algorithmic automated trade entry programs large liquidity participants use put orders into the market this way now........... [ame=http://www.youtube.com/watch?v=cgpQBZF2sZQ]‪Phalanx (CIWS) Block 1B LPWS Testing and Firing‬‏ - YouTube[/ame] They "spray" in liquidity (small lot "sequenced" trades) to MASK their entry into the market......up to 950 single lot entries in ONE SECOND capability.....woooo!

ETF - BTW, Kyle is making the new PROX Bars available on a persons own charting now by releasing the programming code.... [ame=http://www.youtube.com/watch?v=R3mBP6JVna8&feature=related]‪PROX Bars Basic Intro (logic based price bars)‬‏ - YouTube[/ame]

I don't watch his youtube videos so was not sure....whatever he was using it sure did not work. :doh: