Cumulative Volume Delta

The Cumulative Volume Delta indicator provides a cumulative representation of market buying and selling pressure by applying the Bull and Bear Balance logic to volume data. This tool allows traders to visualize the long-term trend of aggressive buying versus aggressive selling, helping to identify potential trend reversals or continuations based on volume flows.

Usage

The indicator can be used to gauge the overall sentiment of the market. When the Cumulative Volume Delta (CVD) line is rising, it suggests that buying pressure is dominant, whereas a falling line indicates prevailing selling pressure.

Traders can enable a Moving Average (MA) to filter the CVD movements. Interactions between the CVD and its MA can serve as directional signals:

• Bullish Sentiment: When the CVD line crosses above its MA, the background often transitions to a bullish color, suggesting a shift toward buying momentum.
• Bearish Sentiment: When the CVD line crosses below its MA, the background often transitions to a bearish color, suggesting a shift toward selling momentum.

Details

This implementation is based on the Bull and Bear Balance Indicator developed by Vadim Gimelfarb, originally published in the October 2003 issue of Technical Analysis of Stocks & Commodities magazine.

Unlike standard delta calculations that simply use price close relative to open, this method evaluates the relationship between the current bar's high, low, open, and close, as well as the previous bar's price action, to determine "Bull Power" and "Bear Power." These power values are then used to fractionally assign the bar's total volume to either the bull or bear side. The resulting delta (Bull Volume - Bear Volume) is then accumulated over time to create the CVD line.

Settings

• MA Length: Determines the period used for the Simple Moving Average (SMA) calculation applied to the CVD.
• Plot MA?: Toggles the visibility of the Moving Average line and the associated cloud fill on the chart.

FAQ

How do I interpret the CVD line?

A rising CVD line indicates that net buying volume is increasing, while a falling line indicates that net selling volume is increasing. Divergences between price and CVD can often signal weakening trends.

What does the cloud color represent?

The cloud color changes based on the relationship between the CVD and its Moving Average, helping to visually highlight shifts in volume-weighted momentum.

How can I access this tool?

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