Cumulative Volume Delta with Divergence

The Cumulative Volume Delta with Divergence indicator visualizes the net difference between buying and selling pressure through candle-style plots while automatically identifying momentum shifts using price-volume divergence.

Usage

This tool is designed to help traders identify periods where volume sentiment contradicts price action, often signaling potential reversals.

• Cumulative Volume Delta (CVD): Represented as teal (bullish) or red (bearish) candles. A teal candle indicates that buying volume exceeded selling volume during that period, while a red candle indicates dominant selling pressure.
• Regular Bullish Divergence: Occurs when the price makes a lower low, but the CVD makes a higher low. This suggests selling pressure is exhausting despite the price drop. It is marked with a green line and a "Bull" label.
• Regular Bearish Divergence: Occurs when the price makes a higher high, but the CVD makes a lower high. This indicates buying interest is fading even as prices rise. It is marked with a red line and a "Bear" label.

Traders can use these signals to spot early momentum shifts or to confirm entries and exits when combined with other technical analysis methods.

Details

The indicator utilizes the ta.requestVolumeDelta() function to retrieve lower-timeframe intrabar data, providing a high-precision approximation of up and down volume. This data is then aggregated based on an "Anchor period" (e.g., Daily) to form the CVD candles.

The divergence logic looks back over a specific range to compare pivot points in both price and the final volume delta value. Because it relies on pivot points, signals are confirmed and displayed after a small lookback period (5 bars) to ensure the peak or trough is established.

Settings

• Anchor period: Sets the timeframe used to reset the cumulative delta calculation (e.g., "1D" resets the delta every day).
• Use custom timeframe: When enabled, allows the user to manually select the lower timeframe used for delta calculation.
• Timeframe: The specific lower timeframe to use for volume data if "Use custom timeframe" is enabled.
• Calculate Divergence: Toggles the visibility and calculation of the bullish and bearish divergence signals.

FAQ

How do I use the Cumulative Volume Delta with Divergence?

You can use it to monitor the balance of trade aggressiveness. Look for teal candles for buying dominance and red for selling dominance, and pay close attention to divergence labels for potential reversal warnings.

Why is there a delay in the divergence labels?

The indicator uses a pivot-based lookback mechanism (5 bars) to confirm that a high or low is actually a pivot point. This ensures the signals are more reliable.

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.