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What is Delta?

📊 Delta - A Key Order Flow Indicator​

🔍 What is Delta?​

Delta represents the difference between buying and selling volume in the market.
It is one of the most important indicators of order flow, helping traders see who is in control at any given moment - buyers (bulls) or sellers (bears).

📌 How is Delta Calculated?​

Delta is calculated as the difference between aggressive buying (market buy orders) and aggressive selling (market sell orders):

Delta = Market Buy Volume - Market Sell Volume

  • Positive Delta → Buyers are dominant.
  • Negative Delta → Sellers are dominant.

📈 Types of Delta:​

  1. Bar Delta → The difference between buys and sells for a single candlestick.
  2. Cumulative Delta (CVD) → The cumulative sum of Delta over a given period.
  3. Session Delta → The total Delta for an entire trading session.
  4. Delta Profile → The distribution of Delta across price levels.

🔎 How to Interpret Delta?​

  • Positive Delta + Rising Price → Strong bullish pressure, confirming the uptrend.
  • Negative Delta + Falling Price → Strong bearish pressure, confirming the downtrend.
  • Positive Delta + Falling Price → Potential absorption of supply (possible reversal down).
  • Negative Delta + Rising Price → Absorption of demand, possible reversal down.

🏦 Delta and Liquidity​

Delta is closely related to liquidity and stop-loss hunts. Large market players often create false moves (fakeouts) to trigger liquidity from retail traders before entering their positions.

💡 Monitoring Delta alongside Open Interest and Volume Profile can help identify strong entry points.