Order Flow Intro: Delta

Alright guys, what's going on? This is Ryan with Blockroots and this video is going to be on Delta. So we're going to talk about Delta briefly and I'm going to show you what it looks like on the chart and how you can go about how you can go about finding it, whether or not you use Tensor charts or Exocharts or any of the other available platforms that give you that inside the bar data. So I'm going to make these videos about specific subjects that we're going to be referencing a lot of. Rather than try to, you know, give you a timestamp within a certain video, I think it'll be better to have these individual videos, you know, keep them short and sweet. We'll just try to really cover each individual topic so that you have a easy referenceable video to look back on if you ever have any questions about a topic that we use. So anyway, moving along, so what is delta? So we remember that there are two types of order flow. There's passive order flow and there's active order flow and passive order flow. That is when you use a limit order and you're putting an order on the order book. And remember, this is an invitation to do business. This is an advertisement to either buy or sell. Now active order flow or aggressive order flow is when you're reaching across the spread and you're taking liquidity. So one provides liquidity, one takes liquidity. And delta is the difference between takers, right? So aggressive buyers and aggressive sellers. So, so the difference between finalized executions at the bid. So when we say at the bid we mean sellers hitting the bid and finalized executions at the offer. So when we say a buyer lifts the offer, he takes available liquidity from the offer. So these are the, this is rather this quantity or this number is the difference between aggressive buyers and aggressive sellers. And this is very important for order flow trading or rather a very important metric in order flow in regards to order flow. And it shows us the strength of either buyers or sellers per period or per candle. And there's not just rather on certain charts you can get other options besides candles that are based on time. You can actually have candles that print based on price ranges covered, you know, tick charts. You could have candles that print based on the amount of volume in each candle, right? So you could have a candle that prints based on every time it exceeds 50 million, it prints a new candle. So you could change the periodicity of candles. But delta is either going to be positive or negative. So if we have a four hour candle Based on four hour time period. If the delta is positive, this shows us that buyers were aggressive. This shows us that buyers controlled the candle, especially if the candle is moving up. Positive means that buyers are aggressively lifting the offer. Negative means that sellers are aggressively hitting the bid. This is considered either again active or aggressive order flow. So market executions. So you need for a limit order to be fulfilled, you need a market order to execute. So you need someone to actually take that liquidity. So a limit order and a market order need to be meet. So trends and major areas of support and resistance should be supported by changes in delta. So just to cover on what we've covered in a separate roadmap, the idea of the auction, right? So when price comes back down to the value area low, where it is beginning to become cheap, what would we want to see? We would want to see an increase in positive delta. We would want to see that buyers were becoming more interested in an area, whereas at the top of a range we might see the opposite. We might see price in a trend begin to move from a period of increasing delta, increasing positive delta to decreasing delta and then eventually to a negative delta print showing that sellers were beginning to gain control. So trends should be supported by this. This will help serve as confluence for identifying major areas of support and resistance. When we say trends want to be supported by this, what we want to see is a trend continue to show strong signs if it's moving upward, say of increasing delta or at least a positive delta overall, showing that buyers are aggressively stepping in and continuing to keep the strength of the trend moving upward. This applies to moves to the upside trends upward and trends downward. So let's just take a look at two available options that we can use. We can look at XO charts and we can look at tensor charts. So I'm going to stick on tensor charts really quickly just to show you again what it means to lift an offer or to hit a bid. So an aggressive order or active order flow means that I'm not placing an order on these books. If I'm looking to buy, I'm not placing a limit order which would put me in this area. I am instead taking liquidity. So aggressive order flow or active order flow means that in the case that if I was buying, I would be taking what is available right here, I would have to cross the spread. So go from here to here. So that would count as an increase in delta. So plus one for delta, right? On the flip side, if we are selling into the bid or hitting the bid, if we're a seller, we're not placing the order here to be met by an active hand. We are immediately executing this and we are selling right into the bid. So again, that would be a negative print in delta. So it's when you're taking liquidity and you can see what this looks like when we look at a footprint chart. So on each of these candles we see where traders aggressively lifted the offer on the right hand side and the volume traded at the bid on the left hand side. So volume traded at the bid on the left hand side, volume traded at the offer on the right hand side. So on the left hand side, it's sellers aggressively hitting the bid on the right hand side, it's buyers aggressively lifting the offer. So this is volume here and volume here. We could actually take this candle though and show what the delta is between each of these levels. So it would be the difference between these numbers. Okay, so hitting this and now we're seeing negative delta, negative delta, positive delta, very low value, positive delta, negative delta. So the negative delta again is where sellers were in control. Okay, positive delta again, where buyers were in control. Because if we look back, if we look at this value right here, for example, 204. So what that is is 45 and 249. So 249 contracts bought. So think about that volume lifting the offer versus 45 hitting the bid. Okay, so the difference between these two values gives us this. Right? So that's a positive delta and that's a negative delta. Now if we look at something like exo charts and again on tensor as well, you could do this, you could see at the bottom, it'll show you for the entire candle whether the delta was positive or negative based on a red or green candle. Now if you're on exocharts, you can actually see this numerically. So again, this is the bid and the offer as indicated by these volume candles on either side. So on the left hand side the that is executions at the bid. So sell orders into the bid at the right hand side we have buyers lifting the offer and the volume. For each one transacted, each level transacted. So if we look at this and we change this over to delta profile, we'll see there's a positive delta. Okay, there's a positive delta right here. All right. Or rather, I'm sorry, this is red. So this is a negative delta. The delta for the entire candle is under here. Alright, we can show what the delta per period is or per area by this. So now you can see negative delta, negative Delta, negative delta. And what that is is just showing us the difference between these values. So 1.1 million lifting the offer, 3.7 million sold into the bid. So that's going to be a negative value because in that case the delta is negative. Alright, so this also shows you for the candle, and this is a 15 minute candle, what the delta is for the entire bar. So if we looked at the sum total of the left side and the right side and the difference between those, so this entire candle has a negative delta. And then down here you'll see the delta printed as well. So again, this will be useful because when we're approaching the high of a range, we would likely see delta begin to taper off. When we're approaching the bottom of a range, we'd likely see delta begin to increase. Alright, this leaves out the occurrences where there is divergence in delta. So we'll have a separate video for that because that is a very important sign to pay attention to. But this is just basically what delta is. Right. So it's the aggressive orders hitting the bid, the aggressive orders lifting the offer. Okay. Rather the difference between those two values. So if it's positive, buyers are in control. If it's negative, sellers are in control. And this is a very useful metric to pay attention to when we are looking for areas of support and resistance to, to be confirmed, or when we are confirming trends to the upside or to the downside. So that's that. Guys, this is Ryan with black roots. As always, exercise proper risk management and trade effectively.