The main "problem" with the Delta Phenomenon is that it can be very subjective. This assertion is borne out by this quote - "We have observed over time that market participants using Delta and applying it differently do not make buy & sell decisions en-masse at the same time. Also, while the Delta order is perfect, our interpretation of the order is never 100% accurate." which is taken from the FAQ section of the above mentioned message board. Also here are some random comments that I have cut and pasted from the above linked forum thread (views expressed are those of the original forum posters, not mine)
- ...as the delta phenomenom could be really nothing but a recurring coincidence that no one can actually use with a good accuracy rate.
- ...while there may be something in the theory, finding a practical application for it is impossible. To make sense of it everything has to be viewed in hindsight...
- I thought it was interesting, but just like drawing lines on a chart, I could find a turning point any sequence I decided to use. I think we humans are extraordinary at seeking out patterns in the world around us. Maybe not such a good thing though if there really is no pattern, just perception.
- Like most any indicator, it looks great in hindsight as you can apply each turning point to the nearest high/low. Problem is, of course, you never know this in real time, only after the fact.
- Trading with Delta is a lot like looking at an MT4 indicator that "repaints".
- Mind you, I'm not saying the concept behind Delta is not valid. Just that because of the latitude afforded on either side of the "turning point" day, plus the idea of inversions......it's just real tough to be sure until after the fact. Even the monthly newsletter that Wilder sent out with turning point calls was often subject to correction and change.....a lot of subjectivity with this method.
- Much is left to the trader's own subjective judgment.
Monte Carlo Methods
Statistical Hypothesis Testing