Volume Divergence Reversal Signals

The Volume Divergence Reversal Signals indicator identifies potential trend reversals by analyzing divergences between price action and normalized volume while providing integrated volume delta data.

Usage

The script is primarily used to identify "exhaustion" or "effort without result" scenarios where price extremes are not supported by volume activity.

• Identifying Signals: Bullish signals (▲) appear when price makes a Lower Low but normalized volume makes a Higher Low, suggesting selling pressure is drying up. Bearish signals (▼) appear when price makes a Higher High but normalized volume makes a Lower High, indicating a lack of buying conviction.
• Reading Labels: Each signal label displays the total volume and net delta (buy vs. sell pressure) for that specific pivot. For instance, a bullish divergence accompanied by a positive (+) delta can confirm aggressive buying interest at price lows.
• Confirmation: Because the script uses pivots, signals are confirmed after a specific number of bars defined by the "Pivot Lookback Right" setting.

Details

The indicator transforms raw volume into a 0–100 scale using a long-term lookback to standardize activity across different market regimes. It then monitors pivots within this normalized data to find discrepancies with price structure. By integrating ta.requestVolumeDelta(), the tool provides granular insight into the internal order flow (Cumulative Volume Delta or per-bar delta) at the exact moment a volume pivot is confirmed.

Settings

Volume Settings

• Normalization Length: The lookback period used to scale volume between 0 and 100.
• Calculate Divergence: Toggles the detection of regular bullish and bearish divergence patterns.
• Volume Delta Lower Timeframe: The lower timeframe used to calculate the delta values displayed on labels.
• Volume Delta Cumulative Period: Optional setting to use Cumulative Volume Delta (CVD) instead of per-bar delta.

Divergence Settings

• Pivot Lookback Left: Number of bars to the left required to identify a volume pivot.
• Pivot Lookback Right: Number of bars to the right required to confirm a volume pivot (affects signal lag).
• Max Bars Between Pivots: Maximum distance allowed between two pivots to qualify for a divergence.
• Min Bars Between Pivots: Minimum distance required between two pivots.

Appearance

• Bullish Colour: Defines the color for bullish signals and positive volume elements.
• Bearish Colour: Defines the color for bearish signals and negative volume elements.

FAQ

How do I access Volume Divergence Reversal Signals?

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

Why do signals appear several bars after the price peak?

Signals are based on pivots which require "Pivot Lookback Right" bars to confirm that a high or low has actually formed. Adjusting this setting lower reduces lag but may decrease signal reliability.

Can I use this on any timeframe?

Yes, the script is designed to work on all timeframes, though it is recommended to adjust the "Volume Delta Lower Timeframe" to a smaller interval than your main chart for the most accurate delta calculations.