 Hello everybody, good evening and welcome to today's webinar. Before we get started, let me just quickly remind you the promotion still owned by Volumetrica Trading and TickMill, which allows you, for those who are already ticking customers to get a Volsyslides and set a special price, for those who are not customers already, you can still of course request a temporary free demo emailing info at volumetricatrading.com And of course, if you can help, hi, this is the link at which you can, the dedicated page to the promotion in collaboration from Volumetrica Trading and TickMill. From this page, you can of course have a special price in order to get a Volsys license. Of course, terms and conditions apply. In case you want to request a free demo of the Volumetrica Trading Volsys platform, you can use the contact form here at this page, Contact Us and request a free demo for the platform and the Volumetrica team will be quickly in touch with you. Today for the webinar and of course, let me just remind you before I forget, since the topics of the latest webinars we are going through, I'm perfectly aware they're getting a little bit more difficult than the first ones. Here you can see in the Volumetrica Training website among the educators, there is my email address. If you want, you can email me and ask maybe some questions. I'll be glad to give you a reply. So, said that, let's get to the topic of today. Today, we will be talking about Delta, what Delta in terms of volume indicates, what a market maker structure is and why is the concept of Delta connected to this concept of market microstructure and why this is important to understand these concepts in order to have a key interpretation of volume and of course, that can be applied to our trading strategies, to our trading analysis. Okay, before we start, let me just have a quick chat about the S&P 500 because that also gave me the chance to talk a little bit about make a quick recap about what we said last time about volume profile, volume profile analysis because in my opinion we are getting into a quite tricky phase for the American indices and S&P 500 of course as the main index in terms of stock market. Okay, what is happening right now at the S&P 500 future? We have started, as you can see here in my chart, downward phase. Okay, we had two days with a strong sell-off. Okay, and right now we are getting very, very close to an area which according to a long-term analysis of the volume profile, it is quite important why the area I'm talking about is the 4150, so exactly, exactly here. As you can see, we are in a specific phase for the long-term volume profile. This is a 400 days volume profile, so it is a composite profile. It is a little bit different as a concept since the one that we have talked about last time since we mostly talked about the analysis to be conducted on a daily profile, but the concept and the kind of analysis you can make of this volume profile is exactly the same we did last time based on the daily profile. So as you can see, we are very, very at the bottom part of what is a long-term distribution. As you can see, this distribution. Okay, so right now we are getting closer to high-volume nodes located in the south part of this long-term distribution, and that happened why? Because we price as basically rejected to distribute in the upper part of this distribution area, very large distribution area. So we really need to be careful what these high-volume nodes will be traded because they will tend to act as a support, but of course, at the moment, price will break down the supports. Then, of course, we can have an extension of the volume profile downwards. So in my opinion, this is a very good thing to have a quick look before we start with this webinar, just to have a further application of the concepts we have talked about last time and two times ago. Okay, talking about the volume profile concepts. Today, we will go a little bit deeper in what... It will be an introduction of the Delta concept, which will help us to understand for the next three webinars. Okay, of course, in order to understand properly what all the flow analysis is, we need first to understand Delta, what Delta means and how it creates the Delta. Okay, so we need to understand how the market structure works. Okay, the best way in order to introduce this concept, in order to keep it very, very simple but understandable, of course, is starting from what an order book is. Okay, many of you have maybe already worked using an order book. Okay, also known as Depth of Market, D-O-M. Okay, let me just quickly zoom in. Okay, here, like this. Okay, this is, of course, the order book for S&P 500. This is exactly the one you can have on the Volsys platform. Then later I'll show you how to open a new chart showing the Depth of Market for each instrument. First thing we can notice making this tool is that we have, of course, the price in the middle, the price which is trading, which is this one you can see here, the one is highlighted in red at the top price, in green at the bottom price, which is in the middle of the tool. And at the right side of the price, we have the Ask column. Okay, on the left side of the price, we have the Depth column. Okay, what do those columns show? Basically, in this column, you can have a list of what limit orders are. Okay, so how many limit orders are placed at each levels? For what regards the Ask column, you have sell limit orders above the traded price and buy orders are located below the traded price. So basically, we have buyers located below and sellers located above the currently traded price. Why? Basically, because those orders are just pending orders and they are just orders of traders willing to sell or buy at a specific price. But basically, they don't want to be executed at a worse price than that. Okay, so for instance, if I want to sell the market at here, 39, 17.75 and I want to make sure I don't have a sell entry below this level, all I have to do is placing a sell limit order exactly at this level. And that will make me a passive seller. Why a passive seller? Because first of all, that explains very well the kind of trading I want to do around that area. I don't want to absolutely be in the short trade. I'm just waiting for market to reach the price I would like to have. Okay, so what I'm going to do is just placing another there and waiting for price to give me an execution at that level. Okay, but by placing a limit order, I am telling the exchange that in case I can't have that price, I don't want to be executed at all. Okay, so basically my order just won't get filled. Okay, of course, so basically as a passive seller, what I'm trying to do, I'm trying to have a better price since I'm selling, I want to sell at a more expensive price compared to the one is currently trading right now. Okay, so I'm trying to get a better price basically. Of course, a buyer, a passive buyer will look to do the same. A passive buyer will look to buy at a cheaper price than the one currently traded. So what it might do is placing by limit orders. Let's assume, for example, 39. As you can tell by the price that this slide is taken from the S&P 500 of last year, that was a very different price by the one traded nowadays. So just never mind. So a passive buyer, of course, would place a buy limit order at this level and just wait for price to reach this level and of course, have its execution if that price can be traded. Why? So basically, we can already tell something very important, a specific feature of passive traders. Passive traders, whether they are sellers or buyers, they don't care that much about being traded, about being in the market. What they care about is having an execution at that price, not a single tick worse than that. Okay, so that makes them passive sellers. So we can tell that passive sellers or buyers and their orders is what constitutes, what it makes, what it builds, market liquidity. Why? Because since those are orders just being placed there and waiting to be executed, that offers that opportunity for other traders to use those orders in order to have an execution. Okay, so let's assume right now I want to buy a contract of S&P 500, but I don't want to do that as a passive trader. I just want to buy a lot at the current traded price. Okay, so I'm not trying to be a passive, I just want to be in a long position. So I won't be putting a buy limit order, I just will put a market order. I will buy at market. Of course, if I want to buy the market, what do I need? A seller, of course, to be a counterpart of my trade. Otherwise, I can't buy anything which is sold by, if it's not sold by anybody to me. So of course, if I want to buy the market at the current traded price, I will be an aggressive buyer. Why? Because compared unlike passive buyers, I don't care in these cases, in this case, if I am using a market order what my execution price will be. What I care about is just being in the long trade. Doesn't matter at what price. Okay, this is the first reason making me an aggressive buyer. But of course, if I am an aggressive buyer, as we said, I need a seller. So where do I find sellers? Of course, if there are many sellers here willing to sell, I will find the first available seller at the first level where I have sell limit orders. Okay. Those sellers are passive ones, so basically they're just waiting for buyers to buy into the selling orders as I am trading aggressively that level as a buyer. Of course, I will be the perfect counterpart for them to be executed. Okay, so basically my order, my aggressive order will be matched with one, of course, of their passive order already placed there and waiting to be executed. Okay, of course, the very opposite will happen if an aggressive short trader want to aggressively sell the market. He needs a passive by order to fill his trades. Okay, his trade. And where it will find counterpart for his trade? Of course, at the first level of the bid side of the order book because it's at this first level where there are available buyers, passive buyers. Let's put it on his way. If we only had passive sellers and buyers, market wouldn't move at all because we have proposals of selling above the traded price and we would have proposals of buying below the currently traded price. Okay, but we would have sellers hoping to be executed at an expensive price and buyers hoping to be executed at always a cheaper price in order for the market to trade, to transact. We need some traders, some buyers buy into sales and some sellers selling into buying. Okay, we need buyers to go towards the sellers and buyers. Okay, so basically this is market microstructures made very, very easy but of course this is a very important concept because that gives us an example and explains very well the difference of what the difference is between buy limit orders, buy market orders and of course the same for sell orders. In this case, we can have a very good example of this. If we try to, let me just put in simulated mode because I just want to show you how in fact order works. Let's assume I want to put a buy limit order right now here in the chart. Okay, if I click here the buy limit button here in the trading panel of Bolshe's platform it will give me this green line that I can place wherever I want on the chart exactly where I want to buy. A buy limit order is supposed of course to be below the currently traded price because otherwise it wouldn't be proper limit order since I can only try to buy as a passive buyer only below the currently traded price which is this one you can see here as a dashed point line. Okay, so if I place this line right here now I have set to the exchange to the CME that I want to have one lot of micro S&P executed at $41.17.50. Okay, but I don't want an execution at an higher price than that not even one tick higher. Okay, if I try to place this order above the current traded price of course the exchange will execute me immediately. Let's try buy limit order above the traded price of course I will be in the market immediately because what actually let's assume the line was here I was trying to break the order here I said to the exchange exactly the very same thing I want to buy at this level or better of course in this very specific moment the market was trading better than that so my buy limit order will be placed immediately at the current price level but of course it can be executed only as long I have as long as I have aggressive sellers selling into my buying passive order. Okay, so in order for order limit orders to be properly executed we always need the availability of the counterpart. Okay, so in this case if I'm buying I need sellers if I'm selling I need buyers. Alright, of course this gives us the, let's find this position and let's get to another slide showing us how orders according to this specific to this main criteria are matched because of course let me just we'll get back to this slide in a few minutes. Let me just explain one more thing about aggressive and passive orders and its relation to Delta. Many of you may already have heard of Delta like maybe using some tools like for example Delta Profile or CBD cumulative body of Delta referring to the day and let's say what is Delta actually as the definition would suggest it is always a difference. It is always a difference between what is always a spread between what apparently it is a difference between buyers and sellers. Okay, normally as we can see in many Delta indicators like for example the cumulative volume Delta or for example, yeah, let's take as an example here the Delta Profile which is actually let me just get another let me just get another indicator to make an example otherwise it's not good enough. Yeah, let me get this one. Yeah. Okay, so we have at the bottom of the screen a Delta indicator. What does what that indicators shows us basically for each bar you can see in the top part of the screen it shows the difference of power of the buying or selling power within the bar. Okay, but as we said in terms of my market microstructure we can never have more buyers than sellers or more sellers than buyers because of course in that case a transaction wouldn't be possible for every single buyer. We always need to have another seller and vice versa because otherwise any market could be working that way. Okay, so Delta doesn't really show a difference of buying in relation with seller. Delta it always refers to aggressive traders so it always shows the difference between aggressive buyers and aggressive sellers in relation to a specific bar as in this case or a specific level as Delta profile shows we will talk about this very quickly very in a couple minutes but this is not the difference between buyers and sellers. Let's take for example this bar, this one here. This bar at the very top. Okay, which is the corresponding Delta Instagram below. This one, okay. It shows definitely more buying pressure than selling pressure. Okay, so if we make a comparison between all of those traders who have both aggressively on this level and those who have sold aggressively on this bar was information. Of course we can see there is an imbalance in favor of buyers. Okay, because Delta is positive so that shows that buyers were more aggressive than sellers. Okay, but as you can see price didn't go straight away in their favor. Okay, how is it possible? How is that possible? Because when do market picks up or down? When of course, let's go back to the slide about the market microstructure when aggressive buyers for example are able to overcome in terms of contracts traded the number of contracts waiting to be executed. So for instance, if here we have at this level 61 sell order sell limit orders waiting to be executed. If in the next second we have 50 aggressive buyers hitting this level okay, buying aggressively on this level, what would happen? Of course these 50 contracts will need to be executed straight away. So they will consume let's say 50 out of these 61 sell orders waiting here. Those 50 aggressive buyers will be executed so we will have 50 volume trading long aggressively and here 61 passive orders will become 11. Okay, because the first 50 passive sellers will be satisfied already but still 11 are missing because not that much counterpart was provided here on the aggressive side of the book. So market won't move at all. Why? Because in order for market in this situation to tick, to go one tick up we will need 12 more contracts to consume to eat completely those 11 left contracts and look for some more liquidity some more selling liquidity at higher levels. Okay, so this is actually what makes the market tick up or down. So what happens when aggressive buyers try to hit the ask or hit the bid side but market is not moving because they are not strong enough to raise all of these contracts and go and tick higher. We will of course have a measurement of that delta including as a difference of aggressive order only showing a lot of my pressure exactly as it happened here. Here we have lots of buying pressure shown by the delta but of course we can tell by the price action it wasn't able to move the price higher. This is the very specific situation we were talking about a few minutes ago. Here there were maybe actually we can tell how many contracts they were trading aggressively. Delta was in this bar right here the second one actually went up to 1039 delta. So that means that in this bar within this bar there were 1039 more aggressive buyers that sell their aggressive sellers but apparently there were even more passive sellers above the bar went through an area with lots of more passive sellers. So apparently those even if we had lots of buying pressure and the delta is of course the demonstration for that is the proof of that which can be measured of course but apparently they weren't able even if they were a lot even if it was a lot of buying pressure it wasn't able to it to consume all of those passive selling orders which were there of course halting the market because as we said until this liquidity is not used is not treated is not consumed of course market hasn't any reason to go higher. That of course explain us lots of things for example why it happens all the time actually at market many times we can see price at delta indicators showing lots of pressure but market not falling through. The main reason for that is explained by this dynamic which you can see on the market that can be explained by the market structure. Of course we will talk very well definitely better than today but about this kind of dynamic which is called absorption. This is a very basic but of course exact definition of what an absorption is. Price gets absorbed every time we have a large amount of market orders hitting lifting the offer lifting the ask side of the book or hitting the bid side of the book but actually not making it to move price higher or lower. And of course this is one of the main dynamics of analysis there are even many more but this is the most important one the main dynamic around the whole analysis built. So let's move quickly on and go to another to the last concept we will talk about today which helps us understand even better what market structure is and how market orders interact with passive orders. Let's talk about how all this actually are matched by the exchange anytime a request is sent to the broker to the exchange. As we said we have passive orders which actually are limit orders and aggressive orders which are market orders but stop orders as well. Why stop orders are quite different from passive order because actually they are not orders providing market liquidity as unlike limit orders they are not supposed to be buying orders placed below the current trade price or selling orders placed above the current trade price it is exactly the opposite a stop order is an order let's assume market is trading here right now. We can place a sell stop order only below the current price so exactly the opposite of a limit order and of course the same is for a buy stop orders if you want to place a buy order which is above the current trade price it will have to be a buy stop order. So what happens with stop orders as soon as price triggers the level of which we place the order this order will be sent to the exchange aggressively so it will for example here as market gets here this order will hit will buy aggressively the first ask level so basically where the first sellers as a passive sellers will be available and in that case this or this buy order will be matched with the first sell limit orders which will be at that level so in this case basically stop orders are treated the very same way as market orders and our orders matched by market orders and buy stop orders will be matched with corresponding sell limit orders and at this stage the exchange will count and ask print so basically will track this order as one aggressive buy order okay of course in order for this transaction to take place we need both the aggressive part and the passive part but it's like the exchange gives it for granted that of course there is a passive counterpart because otherwise this aggressive side will have wouldn't have been able to execute this trade okay so by just tracking the aggressive side of this trade of course it is a way to consider both part of those actors taking part of that trade and of course the opposite will happen with selling orders being matched with buying passive orders and at bid print will be tracked so as one aggressive sell order okay the difference the spread between ask prints and bid prints considered within a bar or maybe an area a specific price level will give us the delta refer to that bar price level and whatever this delta definition refers to okay this is the main part this is the main concept we need to know about delta in order to understand what we will be saying about all the flow analysis from next time on and of course a next webinar next week we will be talking about how we can use this we can read interpret and use delta concept using a very very fantastic definitely fantastic tool provided by Volsys platform which is the wall analyzer plugin which is divided into two main indicators one of those is the ball swing indicator right here which is based on of course of the base of delta and we will have a quick look on how to use it in our trades okay so we are we are at the end for the webinar of today of course just in case you want to ask some questions of course you are more than welcome let me once again remind the offer you can request either a free demo of the Volsys platform by emailing volumetricatrading.info at volumetricatrading.com I'll just quickly write down the email address in the chat so you can easily add it for your convenience volumetricatrading.com here it is and of course if you are already a tickmail customer you can have a special price for the platform accessing the special offer on for the entire period our webinars will be will be on at this link okay so that's all that's all for tonight I hope the topic was of your interest I wish you a good evening thanks again for your attention see you next week at the next webinar have a good evening cheers