ZTP Cumulative Delta Indicator

Cumulative Delta Example
ZTP Cumulative Delta

The ZoneTraderPro suite is now complete with an enhanced Cumulative Delta indicator.  Unlike other cumulative delta indicators, including the one that is packaged with NinjaTrader Volumetric bars, the ZoneTraderPro Cumulative Delta indicator uses a reconstructed tape feature that allows you to filter for large orders.

Any cumulative delta indicator can show divergence, but no other cumulative delta indicator can show you accurate filtered divergence.

As you can see from the chart on the left, the small retail buyers were the buyers as the market traded up, and the large lot traders were the sellers at the same time.  Only with ZoneTraderPro would you know not to be a retail buyer, but a seller in this situation.

Also note what the cumulative delta calculation is telling you.the retail crowd was net long by 6000 contracts, but the large lot traders were net short -4000 contracts.  Going into the exhaustion pattern, who was right?

ZTP Cumulative Delta Divergence Indicator

The ZoneTraderPro Cumulative Delta Indicator now has divergence built in making it a more powerful trading tool.  Have you seen divergence indicators that are based on momentum, RSI, MACD?  What good are these?  Why put divergence on a 50 year old indicator that is not based on real time information?

A divergence indicator is only valuable if it is based on real time information, and not other indicators.  The indicator allows you to filter for order size.  This way you have the ability to see only what the large lot traders are doing.

The indicator is now more powerful.  It shows regular divergence, special divergence, and accumulation and distribution.

The chart on the right illustrates how powerful the indicator is.  We see three winning accumulation long trades trades, two divergence short trades, and a divergence long trade.  These trades add up to 25 available points in a little under a 3 hour period.

Accumulation and Divergence Trades
ZTP Divergence Accumulation and Distribution

Multiple Divergences

Multiple Divergences
Multiple Divergences

One of the interesting things about this indicator is that you can have  multiple divergences from key points.

Here we see two long trades that had both Special Divergence and regular divergences.  Three additional distribution short trades and a long divergence trade complete a very profitable 30 minutes.

Accumulations with Price Patterns
Accumulations with Price Patterns
Special Divergences
Special Divergences

Special Divergences

Special Divergences are a unique variation from the regular divergence indicator.  They are unique because what they are showing is a manipulation of the large lot traders.  What the signal is picking up is a lack of supply or demand.  This lack of supply or demand accomplishes two things.  First it washes out weak hand players.  The strong hands already have limit orders waiting to accept the stop orders.  Second it allows these players to get a much better price.

These are great trades because of usually how fast they conclude.  They are normally reversed on a market order which you will see in the next section.  In a period of 30 minutes we see 5 of these trades.  The theory of these trades is that we get a consistent 2 points on every trade.

The Order Flow Trigger

Order Flow Trigger

The Order Flow Trigger

There is an amazing trigger to these divergence trades.  This information applies to all 3 types trades of divergence trades.  I have found that in an overall majority of the time, a ZoneTraderPro Order Flow Extension Zone is created 1 tick from the high or low. 

Sometimes, as we see in the above picture, we see an ZoneTraderPro Accumulation Box at the same area.  This is even more preferable because when you think about it, if the large lot traders can accumulate the position, they can guarantee their price instead of having to use a market order.

Also take a good look at the cumulative delta in the picture above.  These signals are not meant to be used in a vacuum.  First, if you took the 1st accumulation long trade, you would understand that ZoneTraderPro would be trading into a Broken Reversal pattern.  With that knowledge, take your 3 points and reverse the trade.  Notice how you also created an extension zone 1 tick from the high at the broken reversal pattern.

When you use the extension zone as a trigger, a significant amount of losing trades are never entered into because you never get a entry trigger.  ZoneTraderPro does not have disappearing signals, and this includes these divergence indicators.  So you can always validate the trading strategy using a static chart.

This is not just for ES Trading

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