Delta Volume/Cumulative delta

The Delta Volume/Cumulative delta indicator provides a visual representation of market buying and selling pressure by calculating delta volume and cumulative delta over specified time fragments. It aims to help traders identify shifts in market sentiment and trend exhaustion through volume analysis.

Usage

The tool can be used to identify high-conviction moves by observing the color and size of the volume bars. Green bars indicate a positive delta (higher buying pressure), while red bars indicate a negative delta (higher selling pressure).

The indicator displays several key components:

• Total Volume: Represents the overall trading volume in the background.
• Buy/Sell Volume: Visualizes the individual components of the total volume.
• Delta Volume: The difference between buying and selling volume for the current period.
• Cumulative Delta: A running total of delta over a specified period, smoothed by an EMA to identify broader sentiment trends.

Traders often look for divergences between price action and the Cumulative Delta or zero-line crossovers in the Delta Volume to anticipate potential reversals or trend continuations.

Details

The script calculates buying and selling volume based on the relationship between the close and open price. If the close is greater than the open, the volume is attributed to buying; if lower, to selling.

To provide more granular data, the script uses request.security to fetch volume data based on a user-defined "Fragment Size" in minutes. This allows the indicator to approximate intraday delta dynamics even when viewing higher timeframe charts. The Cumulative Delta calculation can be set to an unrestricted sum or a rolling sum over a specific period.

Settings

• Fragment Size (minutes): Determines the timeframe used for internal volume calculations. A larger size is recommended for higher timeframe charts (e.g., Monthly).
• Period of Cumulative Delta: Sets the lookback period for calculating the rolling sum of delta. Setting this to 0 results in an unrestricted cumulative sum from the start of the chart.
• EMA Period of CD: Sets the length of the Exponential Moving Average used to smooth the Cumulative Delta output.

FAQ

How do I interpret the Cumulative Delta histogram?

When the Cumulative Delta histogram is above zero and green, it suggests an overall bullish sentiment over the selected period. When below zero and red, it suggests bearish sentiment.

Why does the indicator use a Fragment Size?

The Fragment Size allows the script to analyze volume distribution more precisely by looking at smaller time chunks, providing a more accurate estimation of buy/sell pressure than standard candle analysis alone.

How can I access Delta Volume/Cumulative delta?

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