Jigsaw Trading Review – Alternate Dimensions of Trade Info

Published on: March 14, 2023

Indicators, can they really help with your trading? Or are they just a nuisance, one more thing for you to look at and probably making you always second guess your initial reading, ending up losing a good trading opportunity? Or maybe not all indicators are equal. 

Most indicators are derived from price and have a number of parameters or settings that you can ‘tweak’ them with. The thing is – price-derived indicators are just another way to look at the price, whereas other indicators show a different dimension of information because they are not created from price data. So, you are looking at a different set of information. In this jigsaw trading review video, we’ll take a look at two of these –  the Cumulative Delta, and the Volume indicator.

While one can set the bias for your trade, the other can indicate where the market reached a tipping point and might be ready for a reversal. You can use both together or separately, depending on how good you are at processing all the information generated, but one thing is certain, having an understanding of order flow is key for your trading success.

Notes:

Hi all,

Today we are going to continue our Jigsaw Trading Review with a look at some components of the Vista chart.

There are 4 indicators available within Vista:

1. We have the cumulative delta indicator
2. The volume indicator
3. The market depth imbalance indicator
4. And the flip indicator

And let’s start with the cumulative delta. It shows the buy market orders minus the sell market orders in a continuous accumulation. This indicator is mostly used to set a bias. If the cumulative delta is moving higher, is an indication that we are seeing more aggressive buyers than sellers, and if the cumulative delta is moving lower, is an indication that we are seeing more aggressive sellers than buyers. 

We can see that in the last 40 minutes or so, we’ve been in a trading range, and we are now trading near its lowest low, after this fast move down. The cumulative delta downward move indicates we saw more aggressive sellers, which can also be seen by looking at the circles, where the highest percentage volume traded was on the sell side.

We are now seeing some buyers coming in, we have a nice pop here, aggressive buyers clearing the offers, but… immediately sellers came back, clearing all the bids, precisely at the same area where they hit the market previously.

Buyers continued to push the market higher, but we could see a small divergence in the delta, where despite prices making a higher high, the delta did not. We can actually see more sellers than buyers.

Our view here was to sell the market, looking for buyers to get trapped, and then being stopped out as prices reverse back down.

We place our sell order, we can see sellers hitting the bid, and the order gets executed.

Prices chopped around in a 4 to 5 tick range after our entry, right above this area, which, in a way, it can indicate that buyers were not letting prices move back down, and when 96 evens started to trade, we considered closing our position. 

The rationale was… despite the delta moving down, prices were not, were actually moving higher, and this can indicate that prices are not moving higher by aggressive buyers, but by sellers pulling their orders, which can be a dangerous game to play when we were looking to see buyers get trapped here.

If sellers are pulling their orders, it can encourage buyers to step in, taking prices further higher, and in this case, maybe sellers were looking to let buyers push prices back to the range high, at 98 even where we can see a big sell order, right above our protective stop loss, and then, maybe, try to trap the buyers there.

As we said, it can be a dangerous game that we had no interest in taking part in, so if 96 even could not hold, we would step away and wait for a better clarification of what was happening.

Fortunately, sellers do start to refresh the offer of 96 and immediately start to hit the bid again, clearing .50s, .25s, and evens. 0.25s do go bid, but there’s no attempt to lift .50s, and prices accelerate downwards, executing our first target. 

We move our stop loss to breakeven. We were looking for prices to continue downwards, to our second target. The bid at 93 evens refreshed, and we moved our second target to it, so if prices came back and that bid refreshed again, we would have the opportunity of getting executed, but prices continue to move higher, executing the stop loss at break even.

Next, we have the volume indicator. It shows the total traded volume per bar. The color indicates the percentage of buy and sell traded volume. When using it, we tend to look for volume spikes, which can indicate prices are near or at a tipping point.

We look for a fast, aggressive move with a lot of volumes, where all the traders that have been agonizing during the entire move up on the outside, always thinking – prices will not move higher, but guess what, prices did move higher and higher until they simply can’t take it anymore, and buy the market.

Ultimately, these late buyers end up being the ones who generate that tipping point, where buyers who got in earlier, start to take profits, taking this way advantage of that late buy interest, and when those late buyers start to get overwhelmed with all the selling and seeing that no more buyers are coming behind them, they start to get stopped out, and at the same time, as prices start to move down, bids start to pull, helping even more, the price reversal.

In this example, we don’t have that last fast move higher before the reversal, but we did have a spike in the volume. 

Prices have been moving higher, we got a large circle where we can see more buy traded volume than sell traded volume around 56.50, and .75s, followed by a fast reversal downward, where all volume was almost 100% selling

The market starts to chop around, between 55 and 56 even, and notice the complete absence of buyers trying to lift prices above 56.

We place a sell order at 55.50 after only 1 lot traded at 55.75, and it gets executed.

Our risk here is clear, we do not want to see the market trade at 56.25 with high volume on the buy side, since that might encourage buyers to step in again if they see offers start to pull.

Prices immediately start to move in our favor, triggering our first target. We move our stop loss to breakeven, prices then triggered our second target, and we move our stop loss to 54.25 where buyers last tried to lift the offer.

By now, we can see prices were accelerating fast to the downside, executing our last 2 targets.

We can see another volume spike, with high volume on the buy side, so those who sold higher, are now taking profits, buying from the late sellers.  

We did put a buy order at 51.75 when no one hit the bid at 51.50, looking for a quick reversal upwards, but as soon we got in, that bid got cleared, which started to invalidate our trade, so we exited with a 3-tick loss.

Prices did continue to push lower afterward.

In hindsight, maybe we should have waited for a better reading, for confirmation that sellers were done and buyers were not letting prices go lower, but then again, the risk was small, we were looking for prices to move back up to at least where the fast move down started, around 53.50 and 54 even.

In summary, despite showing the cumulative delta and the volume indicators separately, they can obviously be used together. It’s up to you to know if you feel comfortable using only one or all indicators together.. Thanks for listening to this Jigsaw Trading Review, look out for more in the coming weeks.