Trading the Market

Electronically traded products such as individual stocks, bonds, emini index futures contracts (such as the S&P 500 Index and the Dow Jones Industrial Average), or other index futures contracts such as the DAX or the Nikkei Index are traded daily by millions of traders worldwide. In addition to the online trader, these products are traded by institutional traders, hedge funds, mutual funds, specialists, or large producers or users of a commodity. These powerful traders have the ability to move and support markets, and influence price action, often without even entering the market. The actions by these traders continually affect the market environment. Without the ability to observe and understand how these actions affect the market environment, an online trader will find himself lagging behind.However, in order to understand the importance that the market environment has to the online trader, he first must understand trading activity taking place within it. Products such as those mentioned above, are bought and sold by and to traders throughout the trading day. It is useful to compare trading these products to the way a vehicle can travel on a highway, that is in one direction or the other. For a trader, the market in which a product is traded is the highway, and the product being traded is a vehicle occupied, or controlled, by either buyer or seller. At any given moment a battle takes place between a seller and a buyer initiated by one or the other when they choose the one of the two directions in which to drive the vehicle; this battle is for control over the price for the product being traded. After this battle is complete and a trade is made, volume is created.A trader uses the market environment to make the decision of whether he wants to control the vehicle, or price. In some market environments, the trader will want to be the driver; while in other market environments, he might allow the other trader to drive because he has determined that it is in his best interest to do so. The analogy chosen—that of a battle for control of a vehicle on a highway—is to assist in the creation of a picture which will allow a more comprehensive understanding of the market elements which determine the outcome of a trade. By understanding these market elements and how they fit together to form the market environment, a trader will understand the different concepts embodied in MarketDelta™, thereby allowing a trader to utilize MarketDelta™ as if it were both the front windshield and rear-view mirror of his vehicle. With the information provided by MarketDelta™, a trader will be able to control his trading to his advantage, given the particular highway road conditions of the moment—or, the current market environment.Before examining the elements which make up the market environment, it is necessary to understand that, from the perspective of a trader using MarketDelta™, each and every element of the market is comprised of one or more of the following core trading variables: buyer’s action, seller’s action, bid price, ask price, traded price and volume. Each of these variables, their interactions and relationships, come together to form the various elements of the market. MarketDelta™ graphically displays each of these variables and their relationships in a logical multi-dimensional manner so a trader can observe them effectively. Through a trader’s experience and understanding of these variables, MarketDelta™ can allow a trader to make the best use of his knowledge or trading “edge.”