Education · Stage 7 · 06
Delta
Delta is the volume that traded at the ask minus the volume that traded at the bid. It is usually explained as «buying minus selling», and that explanation is wrong in a way that matters — because every trade is both.
Mak · 3 min read · Stage 7, article 6 of 9
The arithmetic
delta = volume at the ask − volume at the bid
In a bar where 200 contracts traded at the ask and 150 at the bid, delta is +50. Positive means more volume was executed by people crossing upwards; negative means the opposite.
What it is not
If delta meant buying minus selling, it would always be zero. Every contract bought is a contract sold — that is what a trade is. The number is not measuring demand against supply.
Delta measures net aggression: which side was in more of a hurry, not which side was bigger.
A large positive delta means a lot of people paid the spread to buy immediately. It says nothing at all about whether that was a good idea, and — this is the part that catches people — somebody sold them every single one of those contracts, patiently, on purpose.
Cumulative delta
Add each bar's delta to a running total and you get cumulative delta: a line showing how net aggression has accumulated over the session. Most platforms draw it under the chart.
Its value is not the level, which depends on where you started counting. Its value is comparing its shape with price.
Agreement, and disagreement
When price rises and cumulative delta rises with it, the move is being paid for: buyers are crossing the spread and the sellers in front of them are being consumed.
When price makes a new high and cumulative delta does not, something else moved it. The common explanation is that buyers are «weakening», and a more careful one is available: price can rise simply because sellers stepped away, with very little aggression required. That is the empty room from the very first article of stage 4, measured.
Both readings are descriptions. Neither is a signal, and a market can hold a divergence for hours.
Three things that change the number
- The classification. Delta is built on the at-bid / at-ask inference from the stage on buying and selling. It inherits every limitation of it.
- The bar type. Delta per bar depends on what closes a bar — time, volume, range or ticks. The same market gives different deltas on different bar settings, which is the article on candle types arriving with consequences.
- Where the count started. Cumulative delta reset at the session open and reset at midnight are different lines. Know which one you are looking at before comparing it with anybody.
The reading that leads somewhere
The most useful use of delta is not its sign. It is delta held against what price did with it:
- High delta, price moved — aggression met little resistance.
- High delta, price did not move — somebody absorbed all of it.
The second line is the whole of the next article, and it is where the instruments in this stage stop being separate measurements and start telling one story.