I was asked if I used cumulative delta as an entry criteria. I thought I’d share my answer here.
I do have cumulative delta on my chart but I do not find it useful for divergences. If one looks in hindsight you will often find divergences at turning points. But real time you will find the divergences disappear often. For example yesterday 14 minutes after the open there was a CD Div but a few seconds later sellers pounded it and it dropped several pts. So I have not found it reliable real time. I may be missing something so if anyone is using it successfully then I’m interested.
You can look at your charts to see what happened next. There are way too many holes in the theory of divergence. For one the delta depends on participation which varies by time of day. Another is many pros use both limit & market orders.
I even took the bid/ask off my ladder and just look at the total volume.
So what is the use of CD? Frankly I’m very tempted to take cumulative off and save a lot of screen space. But what I look for is just to see which way the market orders are coming and try not to fade them unless I have a good setup.
The problem with divergences, and this is the main reason I dropped Better Momentum, is they tell you what’s happening NOW in relation to the past. Ok so shorts are less aggressive right NOW (see the chart above). That doesn’t mean they won’t be more aggressive 1 second from now.
As we look at divergences on a chart it seems so obvious in hindsight. That’s because the ones that failed disappear and we don’t see them. If one goes through a day scrolling bar by bar you’ll see what I mean.
If anyone is finding cumulative delta useful, please let me know how you’re using it.