Cumulative Volume Delta

The Cumulative Volume Delta indicator provides a smoothed representation of buying and selling pressure to help traders identify volume-price action dependencies. It calculates the delta between estimated buying and selling volume to highlight market sentiment shifts and potential trend reversals.

Usage

The Usage section focuses on interpreting the relationship between the plotted buying and selling volume lines, as well as the histogram.

• Volume Sentiment: When the green line (Buying Volume) is above the red line (Selling Volume), the background fill turns green, indicating a bullish bias. Conversely, when the red line is above the green line, the background turns red, indicating a bearish bias.
• Delta Histogram: The columns at the bottom represent the Cumulative Volume Delta. Positive (green) columns indicate net buying pressure, while negative (red) columns indicate net selling pressure.
• Strength Wave: An EMA of the dominant volume wave is plotted to provide a baseline for volume strength, helping users determine if current volume trends are expanding or contracting.
• Crossovers: A crossover of the buying and selling lines can be used as a signal for potential trend changes or momentum shifts.

Details

The script computes buying and selling volume based on candle structure. It evaluates the relative size of the wicks and the body to distribute the total volume into buying or selling categories.

• Body Weighting: For bullish candles, the body length contributes directly to buying volume. For bearish candles, it contributes to selling volume.
• Wick Weighting: The upper and lower wicks are treated as shared territory, where the volume is divided to reflect the struggle between buyers and sellers at price extremes.
• Smoothing: To reduce noise, the script applies an Exponential Moving Average (EMA) to these calculated volumes based on the user-defined Cumulation Length.

Settings

• Cumulation Length: Determines the period used for the Exponential Moving Average smoothing of the buying and selling volume calculations. A higher value results in a smoother but more lagging output, while a lower value is more reactive to recent price action.

FAQ

How do I interpret the colored background fill?

The fill indicates which side of the market is currently dominant based on the smoothed volume calculation. Green indicates more buying pressure, while red indicates more selling pressure.

What do the histogram columns represent?

The columns show the raw difference (delta) between the cumulative buying volume and cumulative selling volume for each bar.

How can I access the Cumulative Volume Delta?

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