Cumulative Volume Delta

The Cumulative Volume Delta indicator provides a visual representation of volume delta over a user-defined anchor period while highlighting divergences between price action and volume-based momentum. It aims to help traders identify hidden buying or selling pressure, potential reversals, and market fakeouts by comparing cumulative volume flow against price movement.

Usage

The Cumulative Volume Delta (CVD) tool is used to monitor the balance between buying and selling volume. By plotting volume delta as OHLC-style candles, traders can observe intra-bar delta highs and lows relative to the start and end of the bar.

• Identifying Sentiment: Green or teal candles indicate increasing delta, suggesting buying pressure dominates. Red candles indicate decreasing delta, suggesting selling pressure dominates.
• Spotting Divergences: The script automatically detects discrepancies between price movement and volume flow. These are highlighted by orange candles on the CVD chart.
• Bullish Divergence: Occurs when price moves down but the CVD moves up. This suggests buyers are absorbing selling pressure, potentially signaling a reversal or accumulation.
• Bearish Divergence: Occurs when price moves up but the CVD moves down. This suggests sellers are entering the market despite the upward price movement, signaling possible distribution or a trend exhaustion.

Details

The script utilizes the ta.requestVolumeDelta() function to approximate volume delta (Buy Volume - Sell Volume) by scanning lower timeframe data. This data is then aggregated based on a user-defined anchor period, such as "1D" (Daily).

The candle representation is constructed using four values:

• Open: The cumulative delta at the start of the bar.
• Last: The cumulative delta at the end of the bar.
• Max/Min: The highest and lowest intra-bar cumulative delta values reached.

By default, the indicator automatically selects an appropriate lower timeframe for volume estimation based on the chart interval to balance precision and historical depth.

Settings

• Anchor period: Sets the timeframe over which the cumulative volume delta is anchored (e.g., Daily, Weekly).
• Use custom timeframe: When enabled, allows the user to manually select the internal lower timeframe used for delta estimation.
• Timeframe: Specifies the custom lower timeframe used when "Use custom timeframe" is active. Lower values provide higher precision but less historical data.

FAQ

How do I use the divergence signals?

Divergence signals, marked by orange candles, should be used as a confluence factor alongside other technical analysis tools like support and resistance levels or trendlines to confirm potential reversals.

Why is the CVD candle orange?

An orange candle indicates a divergence where the direction of price (Open to Close) is opposite to the direction of the Volume Delta (Open Delta to Last Delta).

How can I access Cumulative Volume Delta?

You can get access on the LuxAlgo Library for charting platforms like TradingView, MetaTrader (MT4/MT5), and NinjaTrader for free.