Pure Volume Divergence

The Pure Volume Divergence indicator is a volume-based momentum oscillator that applies MACD-style logic to volume-weighted sources to identify divergences and trend shifts.

Usage

The tool can be utilized to identify shifts in market momentum by analyzing the relationship between price movement and volume. Traders can look for crossovers between the MACD and Signal lines or monitor the histogram's color and direction to gauge the strength of buying or selling pressure.

The indicator offers two primary display modes:

• PVD (MACD Style): Displays a histogram, MACD line, and Signal line derived from volume data. This is useful for identifying traditional momentum crossovers and divergences.
• Faux CVD: Displays a zero-based oscillating Cumulative Volume Delta (CVD) representation. This mode provides a direct look at the cumulative volume flow over a specific period, allowing users to see if volume is trending bullishly or bearishly.

Details

The script functions by calculating a volume-based foundation using one of three formulas: On-Balance Volume (OBV), Price Volume Trend (PVT), or Money Flow Index (MFI). Instead of using standard price data, it applies Exponential Moving Averages (EMA) to these volume metrics.

By subtracting a slow EMA (26-period) from a fast EMA (9-period), the script creates a MACD line based entirely on volume dynamics. A further EMA (11-period) is applied to this result to create the Signal line. The resulting histogram represents the difference between the volume MACD and its signal, highlighting acceleration or deceleration in volume flow.

Settings

• Show PVD | Show Faux CVD: Toggles between the MACD-style momentum view (PVD) and the oscillating cumulative volume view (Faux CVD).
• Formula Type: Selects the underlying calculation used for the volume source. Options include OBV (On-Balance Volume), PVT (Price Volume Trend), and MFI (Money Flow Index).

FAQ

How do I interpret the histogram colors? The histogram changes color based on whether the current value is greater than or less than its value four bars ago. Green indicates increasing momentum, while red indicates decreasing momentum.

What is the difference between the OBV, PVT, and MFI modes? OBV adds or subtracts total volume based on close direction; PVT scales volume by the percentage change in price; MFI uses price and volume to measure the "money flow" into or out of a security. Each provides a different perspective on how volume is being committed.

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.