Volume Delta Candles

The Volume Delta Candles indicator visualizes the difference between buying and selling volumes by plotting custom candlesticks derived from volume delta calculations to highlight market sentiment and pressure.

Usage

The Volume Delta Candles tool provides a visual representation of the net volume flow within each bar. Traders can use the color and structure of these custom candles to determine whether buyers or sellers are in control:

• Green Candles: Indicate a positive volume delta, where buying volume (volume during up-bars) exceeds selling volume. This suggests bullish sentiment and can be used to confirm upward trends.
• Red Candles: Indicate a negative volume delta, where selling volume (volume during down-bars) exceeds buying volume. This suggests bearish sentiment and can be used to confirm downward trends.
• Zero Line: The indicator plots a horizontal line at the zero level. Crossovers of this line can serve as signals for shifts in market dominance.

This indicator is best used in conjunction with price action analysis. For example, a strong green candle appearing at a support level may confirm a potential bounce, while red candles during an uptrend might signal weakening momentum or a potential reversal.

Details

The indicator calculates the volume delta by categorizing the volume of each bar. If the close is greater than the open, the total volume for that bar is assigned as "buy volume." If the close is less than the open, it is assigned as "sell volume." The volume delta is the net difference between these two values.

To represent this as a candle, the script uses the following custom logic:

• Custom Close: Calculated by adding the volume delta to the actual price close.
• Custom Open: Calculated by subtracting the volume delta from the actual price close.
• Wicks: The high and low of the custom candle are derived from the maximum and minimum values of the calculated open and close, ensuring the range accurately reflects the magnitude of the delta.

Settings

• Volume Delta Candles: The primary plot settings (handled via the style tab) allow for the modification of candle colors.
• Alerts: The script includes built-in alert conditions for when the volume delta crosses above or below the zero line, signaling a change in market bias.

FAQ

How do I use the Volume Delta Candles?

You can use it to identify imbalances in supply and demand. Large candles indicate high conviction from either buyers or sellers, while smaller candles near the zero line suggest market equilibrium or low participation.

Can I use this on any timeframe?

Yes, the indicator functions on any timeframe that provides volume data. However, it is most effective on timeframes where volume patterns are most distinct and reliable.

How do I access this indicator?

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