The Volume Delta indicator shows the difference between Bid volume and Ask volume. It shows which side of the market participants (Buyers or Sellers) was more active in a certain period. Calculating Bid volume and Ask volume is based on our Bid-Ask Volume indicator.
As we all know, the forex market is decentralized, so we do not have reliable information about the real volume. We also do not know the actual and historical values of the Bid volume (Sellers’ volume) and Ask volume (Buyers’ volume).
However, we can use the tick count volume of Bid and Ask prices to determine the activity of buyers and sellers!
So, with our unique algorithm, we can get a similar volume as in the futures market. With this functionality, we can analyze the flow of buy and sell orders. As you’ll see, it’s a real Holy Grail!
First, we have to note that using our indicator on higher time frames is counterproductive. This is because the number of buyers and sellers is balanced on the higher time frames, so the indicator has no informative value. That’s why we recommend using it on the charts from M1 to M5.
The order flow context of the market should be analyzed for the last ten to thirty minutes. It is always necessary to assess the activity of both sides, buyers and sellers.
There are several scenarios of the order flow context:
|Delta is positive||Delta is negative|
|The market is in an uptrend||Buyers have the power to push the price up. Look for a buy trade.||Sellers try to push the price down, but fail to do it. Look for a buy trade.|
|The market goes sideways||Buyers try to push the price up, but fail to do it. Look for a sell trade.||Sellers try to push the price down, but fail to do it. Look for a buy trade.|
|The market is in a downtrend||Buyers try to push the price up, but fail to do it. Look for a sell trade.||Sellers have the power to push the price down. Look for a sell trade.|