Video Transcript:
Hello, everyone! It’s Dale
here, and in this video, I’ll show you a very simple but highly effective
cumulative Delta trading strategy. What Delta shows you is essentially the
difference between buyers and sellers, and cumulative Delta shows us the Delta
development over time. If you look at this example, it illustrates the strength
of buyers and sellers and how it developed over time. Here in this area, it was
more or less balanced, but then strong buyers took over, which is what Delta
shows us.
Now, how can you apply this
in your trading? Ideally, you use two charts: a price chart like the one at the
top and, below that, a corresponding cumulative Delta chart. Both charts should
display the same area. For example, this should be the same zone as this one,
so it’s easy to spot divergences. This is actually where cumulative Delta
shines—spotting divergences between price and Delta. In this picture, we see
price moving upwards. On the other hand, if you look at Delta, it’s dropping in
this same zone. This is unusual because, most of the time, price moves in the
same direction as Delta, probably about 90% of the time. But when there is a
divergence—like here, with price going up and Delta going down—it suggests that
something isn’t quite right. This gives you an edge because price often follows
Delta. In other words, Delta can tell you in advance what price is likely to
do.
For example, Delta is
dropping, price is rising, and Delta is signaling that even though price is
rising, sellers are dominant and are likely pushing the price down eventually.
And indeed, the price starts to drop. So cumulative Delta is telling you in
advance what price might do.
Let me give you another
example before we dive into the strategy details. Here, we have another divergence
between price and Delta. Price is dropping, but cumulative Delta is rising.
Even though price is dropping, buyers are more dominant, which causes Delta to
rise and creates this divergence. As I mentioned earlier, price tends to follow
Delta, so after this divergence, price is likely to go up.
This is the standard way to
use cumulative Delta to spot divergences, but I want to show you how to make
this strategy more robust and consistent by adding just one more tool: the
Volume Profile.
Here’s the setup I use. At
the top of the screen, we have a one-minute chart (in this case, Euro
Futures(6E), which is my favorite, but you can use any instrument). On this
chart, I’ve set volume profiles that print automatically every four hours. The
volume profiles highlight the most important levels, such as this level here,
where the heaviest volumes traded during a four-hour period. This is a
significant level, and I recommend trading pullbacks to these heavy volume
zones, like this one here. But instead of trading these blindly, use cumulative
Delta to confirm the trade.
Here’s the trick: when price
makes a pullback to a heavy volume zone, look at cumulative Delta. If you see a
divergence, it’s a strong signal to enter the trade. For instance, in this
highlighted zone (in green), price is rising toward the resistance level, while
cumulative Delta is dropping. This divergence tells us that sellers are taking
control, making this resistance level likely to hold. This is your confirmation
to enter a short trade.
Let’s look at another
example. Here, we have another four-hour volume profile with a significant
volume cluster, the point of control. Price rises from this zone, then pulls
back to it. As price moves toward this support level, check Delta. In this
case, Delta and price are both dropping, but Delta starts to rise around the
level. Though this divergence is subtler, it’s enough to indicate that buyers
are gradually taking control.
Next example: here’s a
four-hour profile with a point of control at this level. Price pulls back to
this level, which could serve as support. Check Delta: it’s rising even though
price is dropping. This divergence adds confidence to enter a long trade at
support because price tends to follow Delta.
The cumulative Delta can
also help you avoid bad trades. For instance, we have this four-hour profile
with the point of control here. Normally, you’d consider a short trade on a
pullback to this level, but Delta is rising with no sign of sellers. Entering
here would be risky. When there’s no divergence, there’s no short trade, which
prevents you from making a potentially losing trade.
Let’s see one last example.
Here’s a volume profile with a point of control indicating strong support.
Price drops toward this level, and you check Delta. Delta rises as price falls,
suggesting buyers are taking control, which confirms a long trade opportunity.
Not only can cumulative
Delta confirm trades, but it can also save you from taking losing trades. This
is a simple yet powerful tool that I highly recommend for trade entry
confirmation. You don’t have to use this strategy exclusively with volume
profile levels; it works with any strong support or resistance level.
If you enjoyed this video,
please like and subscribe to my channel for more helpful trading content. To
take your trading to the next level, visit my website, Trader-Dale.com, where you can explore
my trading
courses and custom-made tools. If you want to trade with me live alongside
other funded traders, check out the Funded Trader Academy.
Book a one-on-one call, and we’ll discuss whether this service is right for
you.
