Scalping with Range Bars and Aggressive Data

What a scalp actually needs

Scalping means many trades over a very short horizon, taking small gains from small price changes. His time frames are seconds to minutes, rarely holding more than a few hours. It depends on liquidity, on volatility and on quick access to the market, and it needs a strict exit — one large loss eliminates the many small gains, which is why scalpers use tight stop-loss orders set close to the entry price. The trade frequency is high, so transaction costs weigh more here than anywhere else in the course.

Then the claim the rest of the lesson rests on. Professional scalpers use the order book and the relationship between aggressors and order placement, and all of them use Level 2 data for it. Which makes what is sold as scalping in CFD markets unprofessional, and he gives three reasons it ends in losses:

Spread and commission. Unlike the actual futures market, with its reasonable spreads and low commissions, CFD markets are very costly to scalp. If you must, find a broker with very low fixed spreads and low commissions.
Level 1 data is not predictable low down. Price action and smart money are among the best analyses available, but they are valid on higher time frames — not on one minute or five.
Candle patterns. Breakouts and confirmations are read off candle shapes, and you will not find two CFD brokers whose candles agree on the lower time frames.

Level 1 data showing only price and volume beside Level 2 data showing resting orders on both sides, with the three reasons scalping on Level 1 in CFDs loses — The data decides whether the method is possible at all. His conclusion: scalp futures directly if you can, and if you cannot, read the futures data and trade the CFD through a broker chosen for the purpose. Click to enlarge

A bar that closes on movement, not on the clock

To use futures technique on a CFD you have to combine aggressive data to see the balance of power. His mechanism for that is not a smaller time frame — it is a different kind of bar.

A time frame bar consolidates all the trading activity in a fixed duration: a five-minute bar shows the open, close, high and low of those five minutes. A range bar is created only after price has moved a certain predefined distance. His example: set the range to 2 points and a new bar appears once price moves 2 points from the opening of the bar — which, as he notes in the same breath, means three ticks from the price.

Why bother, when a five-minute chart with Level 2 attached would also work? Because it would mean losing opportunities and increasing the stop distance. The question he puts is the right one: why abandon trading at smaller levels and move to higher time frames, wasting the opportunities that are there.

So: time frames aggregate price data over fixed intervals of time, range bars over fixed intervals of price movement. Same market, two lenses, and the second one is the reason lesson seven's position sizing can work at this distance at all.

Time bars of varying height above range bars of identical height, with the clock driving one and the price distance driving the other — What ends the bar is the whole difference. One is ended by the clock and comes out a different size every time; the other is ended by distance and comes out the same size every time. Click to enlarge

Two footprints side by side, the left one stopping after a fixed number of price rows and the right one running to roughly twice as many — The difference in one picture. The left bar is bounded by a fixed price distance; the right one is bounded by the clock, so it runs to about twice the height.

What range bars buy a scalper

Seven advantages, in his order and with his reasoning attached:

Elimination of noise. A bar forms only once price has covered the specified range, so the insignificant movements that never meet it are ignored and the chart comes out cleaner and clearer.
Consistency of price movement. Every bar represents the same price movement, which helps you assess the strength or weakness of a trend without the time factor cluttering the analysis.
Improved signal quality. Because each bar is the same size, entry and exit points read more clearly, trends are easier to follow and reversals easier to spot accurately — which is crucial in scalping, where every tick can count.
Focus on significant market movement. Filtering out the smaller price changes leaves the substantial and profitable moves that suit a quick technique.
Adaptability to volatility. In high volatility the bars form more quickly and you capture trends and reversals sooner; in lower volatility they form less often, which helps avoid choppy conditions.
Volume analysis by price range. The compression of a range bar and its expansion perform much better than a time frame at identifying attractive ranges and giving a clear read.
Signal generation. With Level 2 data present, identifying which range bars are prone to movement is much more precise for a scalp.

The same market movement drawn on time bars and on range bars, with the range bars forming quickly in volatility and slowly in quiet — The bars adapt to the market rather than to the hour. Eight in a volatile hour, three in a quiet one — and the quiet ones skipped the chop instead of drawing it. Click to enlarge

Reading the footprint on a range bar

Some mechanics first, because they are easy to get wrong. The starting point of the footprint is not counted in the range count. Once price reaches the tenth price tick, a new order at a different price — higher in an ascending bar, lower in a descending one — forms the next range bar. And the bar is read obliquely, in a range bar as in a time frame, because of the standard spread between ask and bid.

This is what sharpens the volume reading. As long as price has not left the range, all of the volume is calculated on that same bar. A range bar can take more than three hours to change, because its calculation is independent of time altogether.

Inside the footprint, the right side is always the aggressive buyers and the left side the aggressive sellers — in descending and ascending bars alike. Numbers shown in a different colour are imbalances: one side at least four times the other. An imbalance indicates buying or selling pressure, and the more of them stacked, the more it indicates aggressive movement. His caveat matters as much as the rule — the number on the opposite side of an imbalance should not be zero or a small number.

Range bars carry a value area and a point of control like any other bar. But he is blunt about the limits: the strategies from the previous lessons do not perform the same way in these bars as they do on a higher time frame like the hourly. Use them for signal generation and for entry through the POC, not as a transplant of lesson four. Volatility does not affect the size of the bar, so all of them are uniform in shape — but when volatility is high and a bar is very voluminous at one point, that indicates the value of the range.

A footprint ladder with aggressive sellers on the left and aggressive buyers on the right, an imbalance marked, and the point of control and value area edges labelled — Sellers left, buyers right, every time. The imbalance is the four-to-one row — and the opposite side of it has to be a real number for the imbalance to mean anything. Click to enlarge

Two footprint ladders with the sell and buy sides marked, imbalances flagged, and the point of control and value area high and low labelled — The bar taken apart: sellers left, buyers right, the imbalances flagged IM, and the POC between the value area edges.

Signals one and two: the double zero, and the fishing rate

Ten signals follow, numbered as he numbers them.

1 — Double zero. When price reaches a point where pending orders sit — the day's high or low, yesterday's, the last session's, or the hourly P2 and P3 — the number of zeros on the side opposite the movement increases. A bearish market grows zeros on the aggressive buyer's side; a bullish one grows them on the aggressive seller's.

2 — Fishing rate. It is not always possible to see the zeros. Sometimes more transactions arrive immediately after the first ones form and the zeros are filled, so a second system records that they were there. And both signals are valid only at the peaks, bottoms and prone points from lesson six.

Short: price at the ceiling, a red candle, and at least two zeros stacked on top of each other in the direction of the aggressive sellers.
Long: price at the floor, a green candle, and at least two zeros stacked on top of each other in the direction of the aggressive buyers.
Fishing rate: if zeros form at those prices for the first time and are later filled, a star is displayed beside that price. The minimum threshold setting is 10, and anything lower is not accepted. At least four stars must be seen stacked together.
Priority: if the peak of today or yesterday was close to P3 of the hourly trend, the fishing priority belongs to P3 — that point is of high importance. If price returns towards P3 and keeps issuing fishing signals, wait for the P3 fishing.
And his own advice about both: although this type of signal can be used independently, it is advisable not to enter on fishing and fishing rate alone, but to wait for the signals taught further down the page.

Two zeros stacked at the extreme of a bar sitting on a known level, and the star marks that appear where zeros formed and were then filled — Two ways of seeing the same event. The fishing rate exists precisely because the zeros are often filled almost as soon as they appear. Click to enlarge

A green bar at the day low and a red bar at the day high, each with two zeros stacked at the extreme and the level drawn in — Both directions of the double zero, each sitting on a named level — the low or high of the day, the last session, or P2 and P3.

An hourly chart above a footprint, with the stars of the fishing rate marked where zeros formed and were then filled — The fishing rate on a real chart: the zeros came and went, and the stars record that they were there.

Signals three and four: divergent delta, and convergent delta

Delta is seller volume subtracted from buyer volume: positive and green means buyer dominance, negative and red means seller dominance. When the delta contradicts the colour of the bar — a negative delta on a green one — that is an incompatible or divergent delta. Inside a footprint it can form anywhere in the market, so its use requires caution and five conditions.

Convergent delta is the agreement case: the difference is positive and the bar is green, confirming the direction. Many of them together signify the strength of the current movement. It too appears throughout the market, so it works in combination with ATS, AVB and the rest, and is most useful in support and resistance zones. Significant volume with a delta over 10 per cent is crucial to it.

What a divergent bar is telling you is worth stating plainly: in a green bar, although there were more sellers, the bar closed bullish. That strongly suggests something stopped the sellers with limit orders and intends to move price the other way.

Divergence — it must be in a support or resistance area.
Divergence — try to use it in the direction of the main trend.
Divergence — the incompatible bar must have high volume, and its delta should account for at least 10 per cent of the total bar volume.
Divergence — better to consider the delta of the day alongside it, and better still to combine it with factors like ATS and AVB. The more algorithmic factors present, the better it performs.
Convergence — never use it alone; combining it with other factors is essential. It is more useful mid-way, for confirming the strength of a movement, so do not use it to enter mid-way.
Convergence — avoid positive convergent deltas with green candles at market highs, and negative deltas with red candles at market lows, for trend entries.
Convergence — bars with compatible deltas and extraordinary volume are crucial, and their breakout in a support or resistance zone is significant.
And the rule he attaches to both, with no exception offered: whether in scalping or any other trading system, never buy at market highs and never sell at market lows.

A green bar closing with a negative delta beside a green bar closing with a positive delta, and the ten per cent threshold that qualifies both — The colour of the bar against the sign of the delta. A green bar with a negative delta means the sellers were stopped — a very different thing from a green bar the buyers earned. Click to enlarge

Footprint bars at the top and bottom of a range with their delta percentages marked, one at 17 per cent and one at 22 per cent — Divergent delta at both extremes, with his percentages on each: 17 and 22 against the ten per cent floor.

Footprint bars with convergent deltas of 17 and 13 per cent marked against bars below the ten per cent threshold — The convergent version, and the bars that fail the test sitting right beside the ones that pass.

Signal five: tick order and tick delta

Every order that enters the market is a tick order. Each tick carries a volume — it can be one, or a hundred or more, which is the trade size from lesson five. A tick is a buy or a sell, so the tick delta can be positive or negative, divergent or convergent, exactly as the volume delta can.

His analysis is about volume, so what matters is reviewing the combination of the two and what it implies:

Delta divergence with tick divergence — a high number of orders with significant incoming volume entered the market, not sufficiently orderly and possibly without a strong algorithm behind it. The passive counterpart has been able to stop and reverse the direction with limit orders and less volume. The strength of the opposing passive.
Delta divergence with tick convergence — the tick convergence aligns with the bar's colour, which indicates the delta volume is algorithmic and cohesive. An aggressive seller with many orders but low volume has temporarily bypassed the passive barrier. The weakness of the opposing passive side.
Delta convergence with tick convergence — the weakness of the opposing side, both passive and aggressive, is quite apparent.
Delta convergence with tick divergence — great strength on the leading side, which has overcome both the passive barrier and the aggressive algorithm of the opposing side. There is still a possibility of a price reversal.

The four combinations of volume delta and tick delta, and what each says about the strength of the passive and the aggressive side — Tick delta counts orders where the volume delta counts contracts, and the four combinations of the two are what separate an algorithm from a crowd. Click to enlarge

Four rows of four tick orders with their individual volumes, each row totalled into a volume delta and a tick delta — Every combination worked out one tick at a time — four orders, their volumes, and the two deltas that come out of them.

Signal six: large print

Large prints — a specific ratio at the beginning and end of the volume range — give insight into the behaviour of passive participants, so measuring them is useful, especially when price reaches support or resistance. If those areas are attractive to algorithms and major players, signs of activity based on volume will be observed. They also show up in the micro-waves forming inside the footprint as price ascends or descends towards a zone.

Two calculations, and the second is far the stronger:

Divide the two end prices of the footprint, upper and lower, and their inverses. His thresholds: x/y greater than 30, or x/y less than 0.5. His worked figures are 171/6 = 28.5, 209/5 = 41.8, 18/117 = 0.15 and 13/33 = 0.39.
Compare the current bar with the previous one. 4169/905 is greater than 3.2 — and on the following slide, 7124/2025 = 3.51.
A volume increase of 3.2 times the previous bar is, in his words, a very important alert: a sudden increase indicates orders and algorithms activating.
Placement matters as much as the ratio. Put large prints at pivot points of support or resistance, on the path towards them, or inside the micro-corrections of the footprint itself — and pair them with other signals.
A large print bar also serves as temporary support and resistance in a scalp. Its breakout at a market top or bottom can be an entry, provided price has reached the main support and resistance levels.

The two ways a large print is calculated: the ratio between the two end prices of the footprint, and the volume of the current bar against the previous one — Both calculations, with his own worked ratios under the bars. The thresholds are fixed rather than judged by eye. Click to enlarge

A footprint at a support and resistance boundary with the end-price ratios calculated beneath each bar — The first calculation on a real bar, with his ratios written under it and the thresholds beside them.

A large print bar with its volume compared against the previous bar and a delta divergence signal marked on it — The stronger of the two: 7124 against 2025 is 3.51, and the divergence signal arrives on the same bar.

Signals seven to ten

The last four, and two of them behave differently from everything above — a point he makes explicitly a few slides later.

Single print. At the corners of the footprint, numbers under 10 at the top and bottom. Appearing again in those ranges, they indicate a lack of market inclination to increase or decrease. But in a retest after an area has been fished, single prints can read as an inclination to increase prices — and if the inclination is strong, it is advisable to exit a position rather than hold it. Separately, during high volume or news one side of the footprint zeroes out completely and the market slides in one direction; that range is considered a potential reversal area, and may be recorded in the market profile too.
Absorption area. Accumulation and pausing that the candles themselves do not make evident, despite the volume range being highly accumulative. An algorithm in the software identifies these areas and displays them. On support and resistance boundaries they give an entry after the breakout, and much more so if a signal arrives after the break. This is also one of the few tools he offers for counter-trend trades — which, as he says, carry significant risk, but which this at least lets you enter at appropriate levels and manage.
Max and min delta. The maximum positive and minimum negative delta recorded in the period. A very high max delta signals strong bullish sentiment at key support or in an uptrend; a significant min delta indicates bearish sentiment at resistance or in a downtrend. Their real use is discovering aggressors and passives when the market moves contrary to the delta of the day. And unlike most of the others, if you missed the starting point you can still use one that occurs along the way.
Daily support and resistance bands. Calculated from the maximum activity of buyers and sellers from the start of the day, stopping wherever that activity decreases and in that same bar. Usable as support and resistance through the day, in combination with other factors, and the market usually retests them — so if price crosses one, it can be used for re-entry. Two warnings: do not open trades against these bands until they are confirmed, and a moving band indicates the current trend continues but is temporary.

Four more signals: single prints at the corners and during movement, an absorption area on a boundary, maximum and minimum delta, and the two daily bands — The remaining four. Two of them get you into a trade and two only describe the market you are in. Click to enlarge

A footprint with single prints marked at the corners of the bars and a second area where one side has zeroed out during a move — Both kinds of single print on one slide — the small numbers at the corners, and the side that empties during a fast move.

A chart where price has fished yesterday's low into an absorption area on the value area low, with the breakout signal marked — Absorption on yesterday's VL after the low was fished, and the signal that came on the break out of it.

A day session with the two bands drawn from peak buyer and seller activity and price retesting both of them — The two daily bands, and the retests he says to wait for before treating them as usable.

Which of them analyse, and which get you in

Ten signals is more than anyone reads live, so he sorts them. Some concepts relate to market analysis and others to entry signals — and examining the relationship between the entry signals turns up an interesting point: most of them are associated with delta divergence and delta convergence.

So the main structure is built on those two, with the other elements used to strengthen them:

Analytical — single print, the daily support and resistance bands, and the absorption area. These describe the market you are in.
Entry — max and min delta, large print, convergent and divergent delta, the double zero with the fishing rate, and tick order with tick delta. These produce a trade.
And the division underneath all of it: divergences are usually used to detect passive movements, convergences to detect aggressive ones. Combining the elements increases the accuracy of both.

The ten signals divided into the three that describe the market and the seven that produce an entry, with divergence and convergence at the centre — His own summary of the ten. Three describe; the rest get you in, and they all run through the delta in the middle. Click to enlarge

The ten signals arranged into an analytical box holding three of them and an entry box holding the rest, with convergence and divergence at the centre — His own summary. Three signals describe the market; the rest produce an entry, and they all run through the delta.

The detector, the hours, and the trend

To obtain appropriate footprint volumes you use a detector. Without it "unusual volume" has nothing to be unusual against, so it is the first thing to set. Then the seven points about direction, which sit above every signal on this page — because market direction is the basis of all of it, and the type of movement, its delta and its slope change which signals fire and how well they work.

Detector — include at least the past 10 days in the analysis range.
Detector — the timing of the analysis significantly affects the averaging. The optimal window is from the European session until one hour before the U.S. market closes, adjusted to your own time zone. Use the first filter for the length of the European session; the later filters suit the U.S. session.
Detector — a larger analysis range gives more accurate averages, but weigh the issues from the previous week and any important news coming.
Trend — divergence signals on movement and against the movement are not suitable for trading.
Trend — interpret signals based on the delta of the day, and use them in the direction of the main movement for better results.
Trend — minimise the number of trades against the main direction; it will benefit you in the long run.
Trend — the slope of the volume movement is very important, and that slope is itself interpreted against the delta of the day.
Trend — the best points for scalping were the ones named in the earlier lessons, and the best time is the overlap between the European and U.S. sessions. Avoid scalping in a low-volatility market or during hours with little movement.

A volume detector set over at least ten days, the overlap between the European and American sessions marked as the trading window, and the trend still governing everything — Three things to set before the first trade. The detector supplies the averages every later threshold is measured against. Click to enlarge

Thirty-two states of a trading day

No one holds ten signals, a trend read and a fundamental view in mind at once. He says so plainly: asked whether the human mind can manage all these factors simultaneously, the answer is no, or it would be very difficult. Signal design exists to combine them, and it splits the analysis in two — interpreting the main movement with the trend teaching, and examining player behaviour with the footprint signals.

The combination is mechanical. Ask five binary questions — trend direction, the slope in movement, the slope in correction, the delta in movement, the delta in correction — and you get 32 possible scenarios, numbered 0 to 31, covering everything that might occur on a trading day. Codes 0 to 15 are the downtrend and 16 to 31 the uptrend. Each is then examined to decide which signal to use, or whether to avoid trading altogether. His readings, kept as he gives them:

Codes 0 to 7 and 16 to 23 indicate a lack of volume support in the movement, making them prone to fishing. With opposite delta, and before important news, the likelihood is stronger.
Codes 5, 7, 15, 20, 22 and 28 should never be used for counter-trend trades. The volume slope is positive and the delta is consistent with the movement into correction, indicating a high probability of reversal and trend change.
Codes 4 and 6 show high selling pressure in corrections, but the market moves the other way because of passive buyers. Codes 21 and 23 are the mirror: high buying pressure moving downward because of passive sellers.
Codes 10, 11, 24 and 25 should only be traded through fishing in the P2 area. This usually appears at the end of the main movement, so a reversal is likely and the entry is in the opposite direction.
Codes 12 and 31 are the best codes for trading, where buying and selling pressure have peaked.
Codes 14 and 29 likely indicate buyers and sellers trapped by passives, then entering aggressively with the main movement during the correction. Suitable for trading.
Codes 8 and 27 are also suitable, because there is a supportive slope in the movement and the delta in correction has become inconsistent with a negative slope — likely from other aggressive sellers joining, and the supply zone.
Codes 9 and 26 represent normal market conditions. Codes 13 and 30, if the fundamentals align with the trend direction, likely indicate limit orders activating, so they can be suitable.

Five binary questions about trend, slope and delta combining into the thirty-two codes his framework uses — Five questions with two answers each. Two to the fifth is thirty-two, and that is exactly where the code numbers come from. Click to enlarge

A flowchart branching from trend into movement and correction, then slope, then delta, ending in buy and sell leaves — The flowchart the codes come from: trend, then slope, then delta, twice over for movement and correction.

The thirty-two numbered outcomes of the flowchart laid out for the downtrend and the uptrend — All thirty-two, numbered. Codes 0 to 15 are the downtrend and 16 to 31 the uptrend.

A written interpretation of each group of codes, saying which are prone to fishing and which should never be traded counter-trend — His reading of every group — which are fishing candidates, which are the best two, and which must never be taken against the trend.

What five years of tick data returned

Every one of the 32 states was run through footprint data processed by machine, in the two major scenarios of buying and selling, with divergence and convergence deltas, over a five-year tick data period. The result is a win rate at a risk to reward ratio of 1:2. Fundamental factors are deliberately not considered in the analysis.

How to read the table:

Cases that contain "non" have a very low win rate, so it is better not to trade them.
The probability of a price reversal from the fishing area is categorised in three levels: normal, slightly powerful (+), and powerful (++).
Fishing P2 indicates a trade direction change — wait for fishing at the trend bottom and enter counter-trend on the signal. His warning attached: it is highly dependent on fundamentals.
Win rates below 40 per cent are also tradable, but require more stringent factors to be considered.
With win rates above 50 per cent, lighter filtration can be used to increase the number of trades.

The thirty-two codes sorted into those with no tradable edge, those that need a fishing entry, and those with a published win rate — Every code carries one of three verdicts. "NON" is not a low score — it is an instruction not to trade that state at all. Click to enlarge

A table of the thirty-two codes against their five binary inputs, with the win rate for divergent and convergent delta in long and short positions — The whole test on one page: every code, its five inputs, and what divergence and convergence actually returned at 1:2.

The six models worth trading

Read across the table and six codes stand out — three in the short half and three in the long. Their published figures, divergent then convergent:

Short positions. Code 12: 56 and 38.40. Code 13: 46.1 and 44.60. Code 14: 50 and 75.00.
Long positions. Code 29: 52.1 and 63. Code 30: 42 and 36.50. Code 31: 59 and 35.70.

Out of those six codes he builds four models, reading each code as either the correction or the movement. Convergences, especially with a delta over 10 per cent, are strong at uncovering the aggressive; divergences are effective for discovering the passive:

Ascending market with negative delta — divergence for buy, the passive case: COR 12-14 and MOV 29.
Descending market with positive delta — divergence for sell, the passive case: COR 29-31 and MOV 14.
Ascending market with positive delta — convergence for buy, the aggressive case: COR 13 and MOV 30-31.
Descending market with negative delta — convergence for sell, the aggressive case: COR 30 and MOV 12-13.
For these three trade models, both in movement and in correction and using both the passive and the aggressive method, these six are the best and least risky approaches. From any of them you can either reverse the direction or go along with it.

The six codes he keeps, with the divergence and convergence win rate published against each one, and the four model definitions built from them — Six codes out of thirty-two, the table's numbers beside them, and the four models he assembles from those six underneath. Click to enlarge

The six code groups singled out from the table, with their divergence and convergence win rates set against each other — The six he keeps, with the numbers next to them — three for buying and three for selling.

Filtering: volume, delta, time and bar size

The machine's statistics carry no fundamental analysis and no human intuition, and some of the trades still returned a very high win rate. Filtering is what raises it further, and it is done on the two main footprint states — delta divergence and delta convergence.

Unusual volume is what he is hunting, so the thresholds are set against it. One note on the hours, because his three statements of them do not quite agree: slide 172 says not to initiate trades before the London session opens and to avoid the first two hours after the American market opens; slide 195 calls the opening of the U.S. market the best time to scalp; slide 167 names the overlap between the European and U.S. sessions. They are left here as he wrote them. What all three agree on is that the volume has to be there.

Use the detector to average the volume of the range bars, so unusual activity has something to be measured against.
The delta shows more potential for buyers or sellers the further it is above 10 per cent of the total range bar volume — so that goes in the settings.
Set the ATS of the bar at a minimum of 1/6. Numbers lower than that have lesser importance.
The AVB level in a bar can indicate the presence of algorithms, so use that factor when you have the smallest big sizes.
There is a relationship between the delta of the range bar and the session delta: the greater the bar's share of the session delta, the more it shows the power of the aggressors. Those are the points of high volume concentration.
Bar size follows the instrument's volatility — typically about 5 per cent of the daily volatility. For currency pairs a range of 10 is usually chosen, adjustable down to 8 as volatility decreases; for the S&P 500 the range is set between 8 and 10 depending on the movement.
And where it does not work: markets with very high volatility but low volume — he names the Dow Jones and the NASDAQ — are not well served by the range bar model or its techniques.

The volume, delta, trade size and big-order thresholds that a bar has to clear, and the range bar size chosen from the volatility of the instrument — What a bar has to clear before it counts. Every number here is a setting, not a judgement call. Click to enlarge

Finding the passive

Both filters rest on one observation about how price and delta disagree. When the market moves up on a negative delta, selling pressure is being absorbed by buyers' limit orders, preventing price from moving down; meanwhile the buyers' own limit orders are less substantial and unsupported, so price slides upward on less buying volume and less order book support. When the market moves down on a positive delta, the opposite occurs.

What makes it measurable is the extreme. A maximum delta of zero means the buyer's delta never once made the bar's delta positive; a minimum delta of zero is the reverse. So a green bar with a negative delta whose maximum delta is zero closed green because of buyer limit orders and their support — which is very effective for discovering where passive presence is significant.

The two scenarios and their settings:

Ascending market with negative delta, buy position. A passive buyer is driving the market up even though the number of sellers has increased the negative delta. Use the formula to uncover the passive when the market peaks and you see a correction in the price range, then enter with it.
Buy signal: div delta, session delta <= 0, max delta <= 0. Or: div delta, session delta <= 0, |min delta| > max delta = 500%, max delta >= 10.
Descending market with positive delta, sell position. A passive seller is driving the market down even though the number of buyers has increased the positive delta. Same procedure once the market has dipped and a correction appears.
Sell signal: div delta, session delta >= 0, min delta >= 0. Or: div delta, session delta >= 0, max delta > |min delta| = 500%, min delta <= -10.
And the second form he shows on the following slide: a divergence delta signal with a minimum delta at or below -20.

A rising market with a negative delta, where a passive buyer is absorbing the selling, and the maximum delta of zero that reveals it — Price going one way and the delta going the other — the signature of someone absorbing rather than chasing. Click to enlarge

A rising market with a negative delta and a divergence signal marked where the maximum delta is zero — The passive filter in place: the market rises, the delta is negative, and the maximum delta never turned positive.

Two divergence signals on a chart, each on a bar whose minimum delta is at or below minus twenty — The second form of the same filter, with the minimum delta threshold marked on each signal.

Finding the aggressive

The same apparatus pointed the other way. When the market rises and the delta is also positive, the volume of aggressive buyers is greater than the sellers' and there is no strong support on the seller's limit order side — the offers are not deep enough, so price moves up. When price falls and the delta is also negative, the situation is reversed.

This condition is usually observed during corrections, and in the momentum following a break of P2. In convergence a maximum delta of zero on a red bar implies there is no strong aggressive buyer in the pathway — or better said, it suggests fishing at the bottom of a deep market, and the breakout of that bar can be entered in the opposite direction.

Ascending market with positive delta, buy signal: con delta, session delta >= 0, min delta >= 0. Or: con delta, session delta >= 0, min delta <= -10, max delta > |min delta| = 500%.
Descending market with negative delta, sell signal: con delta, session delta <= 0, max delta <= 0. Or: con delta, session delta <= 0, max delta >= 10, |min delta| > max delta = 500%.
The second form on the following slide: a convergence delta signal with a maximum delta at or above 20.
And the warning he prints on the slide itself: do not trade a signal at the top of the trading day — it could be a stop fishing attempt. Avoid signals forming at the bottom of the day for the sell case, for the same reason.

A rising market with a positive delta, where aggressive buyers are in control, and the minimum delta of zero that confirms it — Price and delta pointing the same way, which usually means a correction or a break of P2 rather than a reversal. Click to enlarge

A convergence signal with a minimum delta of zero appearing at the top of the trading day, marked as not to be traded — The aggressive filter — and the warning attached to it, because this one formed at the top of the day.

A sell signal in a downtrend on a convergent bar with a maximum delta at or above twenty — The same filter working the way it should: a downtrend, a negative delta, and the signal in the direction of the move.

The settings, ready made

Understanding passive trades is based on the overall delta; dealing with aggressive trades and evaluating their activity is measured through the maximum and minimum delta. In the signal section a different formula is used for each, able to identify them at various stages by controlling the other factors. He describes the setup as very straightforward, and offers it as an alternative to the other methods rather than an addition to them.

Convergence, finding the aggressive. Buy signal: con delta, delta percent of bar = 10%, min AVB = 10, min ATS = 2, session delta >= 0, aggressive = 400%, min delta <= -10. Sell signal: the same, with max delta >= 10.
Divergence, finding the passive. Buy signal: min AVB = 8-16, session delta <= 0, passive = 300%, max delta >= 10. Sell signal: min AVB = 8-16, session delta >= 0, passive = 300%, min delta <= -10.

The two ready-made formulas: convergence with a four hundred per cent aggressive threshold, and divergence with a three hundred per cent passive threshold — The two settings he hands over ready made — and beneath them, both cases found on a real day, one in an hourly downtrend and one in an uptrend. Click to enlarge

The ready-made convergence and divergence formulas written out with their thresholds, beside the signals they produce on a chart — The two formulas as he supplies them, with the buy and sell signals each one produced on the chart beside it.

A grid pairing divergence and convergence against passive and aggressive, with the buy and sell setting for every cell — Every setting on one page, arranged by which player it is looking for and which delta state it reads.

An hourly downtrend above a footprint, with three numbered convergent bars carrying negative delta and a positive slope — The aggressive case on a real day: an hourly downtrend, negative delta, positive slope, and three bars that qualify.

An hourly uptrend above a footprint, with two numbered divergent bars carrying positive delta — And the passive case, the same way — an hourly uptrend with divergence on the bars that mattered.

A delta that changes as it goes

Everything so far reads one bar. The WM divergence reads two, and it is meant for what he calls a variable delta environment — where the delta is not simply increasing or decreasing across the move, but changing character.

The comparison is between a price level and the delta that got there. A higher price reached on a less negative delta, or a lower price reached on a more positive one, says something a single bar cannot. He works it through in two-level and three-level schemas, in aggressive and trap versions, long and short — and prints the actual deltas on each so the comparison is checkable rather than assumed.

Two of his worked pairs: a short schema with -1041 at the higher price and -5654 at the lower; a long schema with +2122 at the lower price and +3641 at the higher. The three-level version adds a second delta change across the same move.

Two levels compared: a higher price reached on a smaller delta, and a lower price reached on a larger one, which is the WM divergence — Comparing the delta at two prices rather than inside one bar. His own numbers are printed on the schemas, which is what makes the comparison checkable. Click to enlarge

A grid of the WM divergence combinations pairing a higher or lower price with a more positive or more negative delta — The WM divergence grid: every pairing of price direction against delta direction, which is what a variable delta environment means.

A two level short schema on a chart with deltas of minus 1041 at the higher price and minus 5654 at the lower one — The two-level short worked on a chart, with both deltas printed — and the smaller one at the higher price.

A two level long schema on a chart with deltas of plus 2122 at the lower price and plus 3641 at the higher one — The mirror image for a long, with the larger delta arriving at the higher price.

A three level short schema with the delta change marked between the levels — The three-level version, where the delta changes twice across the move rather than once.

The trap

In market movements either way, aggressive traders sometimes enter at high speed, in alignment with the direction or against it. The importance of identifying these points lies in price exiting the area. Usually these are points where aggressive traders are trapped, or where their buying and selling ratios are very different but they do not have the capability to move price. The rejection of price from that area is one of the best entry points he names.

The two forms, their settings, and what to do with each:

Buy signal under a red candle, of the divergence candle type — a buyer trap. Setting: buy VOL is more, candle type bearish, aggressive = 300%, min delta <= -10, max delta >= 200.
Sell signal on a green candle, of the divergence candle type — a seller trap. Setting: sell VOL is more, candle type bullish, aggressive = 300%, max delta >= 10, min delta <= -200.
Reversal signals — a buy signal at the market top, if it breaks out, is suitable for entering a short position; a sell signal at the market bottom, if it breaks out, is suitable for a long.
Continuation signals — if you are on an hourly movement, one should not trade against the movement. In an uptrend on the move from a breakout or retest, enter long. In a downtrend on the move from a breakout, entering on a buy signal leads you into a short. Either way you continue the movement.

A buy signal appearing under a red divergence bar and a sell signal on a green one, with the rejection out of the area as the entry — A buy signal under a red bar is not a contradiction to be explained away — it is the evidence that someone bought and could not move it. Click to enlarge

A diagram of buy signals under red bars and sell signals on green bars, sorted into reversal signals and continuation signals — Both traps, and the split that decides what to do with them: reversal at the extremes, continuation on the move.

An hourly uptrend above a footprint with several trap points marked as breakout buys and breakout sells — A day of them on one chart, each labelled with whether it continues the move or reverses it.

AVO and the deviation bands

The last tool in the range. Pay attention to the activity of the algorithms inside and outside the standard deviation ranges recorded by AVO, and set the deviation to the instrument.

For currency pairs, interest rate differentials, economic data releases and geopolitical events significantly affect volatility, so Dev = ±2 to 2.5. For indices, market sentiment, economic indicators and the performance of the constituent companies play the crucial role, so Dev = ±1.5 to 2.

The best use of AVO is when it appears in a correction. If you also receive a signal in the live market at the same moment, you can enter the dip — or use the delta difference technique between two levels, which is the WM divergence above. With an aggressive signal, entry can be made.

His worked entry stacks six conditions at once: the daily high price of VH, AVO activating within the standard deviation band, the weekly VWAP, a correction, a variable delta, and a passive market environment. That is what combining means here — not picking the best signal, but waiting until several of them agree.

Standard deviation bands around the session with algorithmic activity marked inside and outside them, and the deviation settings for pairs and for indices — AVO against the deviation bands, with his settings for each instrument class beside it. Click to enlarge

A 6E chart with AVO plotted inside standard deviation bands at plus and minus two and two and a half — AVO against the deviation bands on the euro contract, with the settings for pairs and for indices written beside it.

A trap strategy entry with six listed conditions met at once, including the daily VH, AVO inside the band, the weekly VWAP and a variable delta — Six conditions stacked on one entry. This is what he means by combining rather than choosing.

Six questions before you scalp

His own summary of the range, and it is a routine rather than a theory. Before scalping, analyse the market environment and the trend against six questions, to understand which type of signal to use today. The first five are the code from the framework above; the sixth chooses between the schemas.

A. Is there any fundamental news? Yes or no.
B. What is the trend direction? Uptrend or downtrend.
C. What is the movement type? Movement or correction.
D. What is the volume slope? Positive or negative.
E. What is the delta type? Convergence or divergence.
F. What is the delta form? Increasing, decreasing or variable.
And the rest of his closing points: trends may seem less significant in scalping but play an essential role in success; positioning signals within statistical and probability-based zones increases your chances of reaching the target; insisting on trading at the top or bottom of the market increases the likelihood of being stopped out, so better to start with a trend and use continuation signals; avoid trading in areas close to support or resistance before price has reached them.
And when no signal comes, consider the source: whether fundamental news is upcoming, the reasons for reduced movement and volume, the day of the week, and where price is sitting.

The six questions he asks about the market environment before deciding which kind of signal to use on a given day — Answer these first and the framework tells you which signals are available today. Answering them after taking the trade is not the same exercise. Click to enlarge

What to take from this one

Three things, in the order they matter:

The bar is the point. A range bar closes on movement rather than on the clock, and that is what shortens the stop — which is what makes the position sizing from lesson seven work at this distance. Everything else on this page is downstream of that one substitution.
Ten signals, and almost all of them collapse into two. Divergence finds the passive, convergence finds the aggressive, and the rest exist to confirm or strengthen those two. If you remember nothing else from the signal list, remember which side of that line each one falls on.
None of it works away from a level. Almost every signal here carries the same condition — in a support or resistance area, at yesterday's extreme, at P2 or P3. Location first, signal second, and the trend above both. And his warning about the method stays exactly where he put it: this is high risk, and it requires a great deal of experience.

Three panels: the bar that closes on movement, divergence and convergence underneath every signal, and the location that has to come before any of it — Where the lesson ends up. Fifty slides of apparatus, and it still comes back to the level, the trend and the delta. Click to enlarge

Next: trading currency futures

This lesson kept sending you to the futures market for data honest enough to scalp on. Lesson nine is about trading it directly — reading the symbol, and what is already priced into a contract month before anyone trades it.

Back to the twelve lessons