Cumulative Volume Delta Candles

The Cumulative Volume Delta Candles indicator provides a visual representation of buying and selling pressure directly on the price chart by coloring candlesticks based on estimated order flow.

Usage

The Cumulative Volume Delta (CVD) tool is designed to help traders identify the underlying conviction behind price movements. By estimating the difference between aggressive buying and selling volume, the script highlights shifts in market dominance. To use this tool effectively:

1. Add the indicator to your chart.
2. Set your primary chart type to "Line" or use the "Bring to Front" visual order setting to ensure the colored candles are clearly visible.
3. Observe sequences of bright candles (Cyan for bullish, Red for bearish) to identify strong momentum.
4. Watch for fading color intensity, which often signals weakening conviction or potential consolidation.

Details

This script estimates volume delta using OHLCV data by calculating the ratio of movement within the candle's range. It utilizes a Kalman Filter to smooth the cumulative data, reducing noise while maintaining responsiveness to genuine shifts in order flow. The tool also incorporates Heikin-Ashi smoothing for trend clarity and offers several calculation methods to determine color intensity:

• Rule-Based: Uses smoothed CVD candles with intensity based on trend strength and continuation.
• Size-Based: Utilizes a Z-score calculation to highlight statistically significant delta changes.
• Aggression %: Colors candles based on the net aggressive volume relative to total volume.
• Aggression Normalized: Ranks the current aggression level against a historical lookback period.

Settings

Core Settings

• Color Method: Selects the logic used to determine candle coloring (Rule-Based, Size-Based, Raw, Aggression %, or Aggression Normalized).
• Responsiveness: Adjusts how quickly the indicator reacts to new delta data.
• Kalman Gain: Controls the adaptation speed of the filtering process.

Filtering & Rules

• Inside Candle Rule: When enabled, the indicator maintains the previous trend's color (dimmed) during inside bars to prevent false reversal signals.
• Enable Session Anchoring: Allows the cumulative delta calculation to reset at a specific time, such as a market open.
• Anchor Reset Time: Defines the specific session time for the delta reset.

Thresholds

• Aggression % Strong/Moderate: Defines the percentage of net aggressive volume required for different color intensities.
• Z-Score Thresholds: Sets the statistical sensitivity for the Size-Based coloring method.

FAQ

How do I interpret the different color intensities?

Bright colors signify strong conviction and high aggressive volume, medium colors indicate moderate continuation, and dark/faded colors suggest weak conviction or potential indecision.

Can I use this on any asset?

Yes, the indicator works on all timeframes and instruments that provide volume data, although results are most accurate on liquid markets.

How can I access Cumulative Volume Delta Candles?

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