CVD Divergence Indicator.1.mm

The CVD Divergence Indicator.1.mm tool tracks the cumulative difference between buying and selling volume to identify potential market reversals and trend continuations through divergence analysis.

Usage

The indicator can be used to spot four primary types of signals based on the relationship between price action and the Cumulative Volume Delta (CVD) line:

• Regular Bullish Divergence: Occurs when the price makes a lower low but the CVD makes a higher low. This suggests selling pressure is exhausting and a bullish reversal may occur.
• Regular Bearish Divergence: Occurs when the price makes a higher high but the CVD makes a lower high. This indicates buying momentum is fading, signaling a potential bearish reversal.
• Hidden Bullish Divergence: Occurs when the price makes a higher low but the CVD makes a lower low, often suggesting a continuation of the current uptrend.
• Hidden Bearish Divergence: Occurs when the price makes a lower high but the CVD makes a higher high, typically indicating a continuation of the current downtrend.

Users can toggle an optional Moving Average (MA) on the CVD line to better visualize the aggregate volume trend. When the CVD is above its MA, the area is shaded green; when below, it is shaded red.

Details

The script calculates CVD by determining "Bull Power" and "Bear Power" using the relationship between the current candle's open, high, low, and previous close. This logic, based on the Bull & Bear Balance indicator, is then used to weight the total volume into buying and selling components. The CVD is the running total (cumulative sum) of the difference between these two volume types.

The divergence detection logic utilizes pivot points (highs and lows) within a user-defined lookback range. By comparing the values of these pivots on the oscillator (CVD) against the corresponding price pivots, the script automatically identifies and labels divergences on the chart.

Settings

Main Settings

• MA Length: Sets the period for the Moving Average applied to the CVD line.
• Plot MA?: Toggles the visibility of the CVD Moving Average.

Pivot Settings

• Pivot Lookback Right: The number of bars to the right of a pivot used for confirmation.
• Pivot Lookback Left: The number of bars to the left of a pivot used for confirmation.
• Max of Lookback Range: The maximum number of bars to look back for a preceding pivot to form a divergence.
• Min of Lookback Range: The minimum number of bars required between pivots to qualify as a divergence.

Visibility Settings

• Plot Bullish: Toggles the display of regular bullish divergence labels and lines.
• Plot Hidden Bullish: Toggles the display of hidden bullish divergence labels and lines.
• Plot Bearish: Toggles the display of regular bearish divergence labels and lines.
• Plot Hidden Bearish: Toggles the display of hidden bearish divergence labels and lines.

FAQ

How do I interpret a "Hidden" divergence versus a "Regular" one?

Regular divergences typically signal a potential reversal of the current trend, while hidden divergences generally suggest that the prevailing trend is likely to continue.

Can I use this on any timeframe?

Yes, the CVD Divergence Indicator.1.mm is designed to work on any timeframe, though many traders prefer using it on higher timeframes to filter out market noise.

How do I access CVD Divergence Indicator.1.mm?

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