The TrackBook widget in MarketDelta Cloud brings you analytical tools that are familiar to traders in proprietary trading firms, at no extra charge. The TrackBook analyzes the market’s Level 2 depth to provide insight into how supply and demand are interacting with real trading volume to show market bias. It is easy to use and offers an immediate snapshot of market forces that ordinary charts cannot capture.
The TrackBook is designed as a short-term tool to help time entries and exits, or to produce meaningful signals for scalpers and traders who like to base their strategies on “reading the tape.”
TrackBook analysis is divided into three sections: “Order Book,” “Volume,” and “Balance.”
When reading the below information, it might be useful to refer to our example charts:
#1 - Order Book
The Order Book tracks resting limit orders across prices above and below current trading price. Limit orders to sell in the market are colored red and appear above the current price. Similarly, buy orders waiting for fills are blue and appear below the current price. The actual trading price appears in bright blue, between these two regions.
The brighter the color, the more orders sit, while dark colors show fewer orders and less interest at that price.
As price trades into bright colors, you can see how the market responds. If the colors remain bright around the currently trading price, then additional orders are entering to replace those that have filled. Eventually, for price to break through an area of strong limit orders, the colors must darken to show fewer orders (eventually zero), allowing the market to trade through to a new price.
Prices further away from the market often have strong interest that appears as a bright horizontal streak on the chart at a certain price. These levels often act as important support and resistance. If these streaks change in color, it shows shifting expectations from market participants.
By watching the patterns of colors over time, you can learn to recognize how limit orders in the market respond to trading activity, and also how trading activity responds to these orders.
#2 - Volume
The Volume indicator is two indicators in one, and is based on actual trading volume, not Level 2 depth. It shows the total volume that traded at that moment, and also the bias for that volume.
This is best explained with an example:
If the total traded volume at a particular point in time is 1000, and 600 from that volume traded on the Ask price, while 400 traded on the Bid price, this shows a buy-side bias, as the active trading activity (market orders) were mostly to buy from those who were selling. In this case there is a “delta” of 200, indicating 200 more trades were buys than sells. This Volume bar will represent the full 1000, but 20% of the bar will be colored blue to show the delta. If a bar is mostly red or blue, this means that nearly all the volume was on just one side of the market. If a bar is mostly white, this means the volume was nearly evenly split between buying and selling.
This allows you to quickly identify the overall bias from actual trading activity, in addition to the standard raw volume at that point in time.
#3 - Balance
At the top of the TrackBook, the Balance indicator shows a quick summary of Level 2 data in the visible regions above and below the current trading price. It represents the total net bias in Level 2 orders within the chart at any point in time. The brighter the color (red or blue), the stronger the bias. A bright red color, for example, indicates that more sell orders are waiting to be filled above market than buy orders below.
The Balance is useful in a few ways. Watching how the Balance changes over time to see sudden shifts in sentiment can often lead to quick signals that appear before a short-term swing in prices. Combining the Balance information with levels indicated by the Order Book can provide extra confidence that a short-term market reversal is imminent.
As with the Order Book, watching this indicator over time for a particular market often leads to patterns that can provide additional insight for trading decisions.