Volume Delta Methods (Chart) [LuxAlgo]

Aug 3, 2023

The Volume Delta Methods (Chart) aims at highlighting the relationship between Buying or Selling Pressure and Price by presenting Volume Delta, and multiple derivatives of volume delta such as Cumulative Volume Delta (CVD), Buy/Sell Volume, Total Volume, etc on top of the Main Price Chart.

The script uses two different intrabar (chart bars at a lower timeframe than the chart's) analyses to achieve the most approximate calculation of the ​volume delta and offers fully customizable visualization features using various types of charts such as line, area, baseline, candles, and histograms.

The script allows traders to see "within" the price bar, provides more transparency over a traditional volume histogram, and also allows users to monitor price and volume activity together.

🔶 USAGE



Volume delta is the difference between the buying volume and the selling volume, in other words, it is the net demand at a given bar allowing traders a more detailed insight when analyzing the market sentiment. A volume delta greater than 0 indicates more buying than selling pressure, whereas a volume delta less than 0 indicates more selling than buying pressure.



Volume delta plus total volume (regular volume) adds additional insight, where the total volume represents all the recorded trades for security that occurs in a given time interval. It is a measurement of the participation, enthusiasm, and interest in a given security.



Divergences occur when the polarity of ​the volume delta does not match the polarity of the price bar.



The users can enable the display of the numerical values of the volume delta.



Cumulative Volume Delta (CVD) is a way of using Volume Delta to measure an asset’s mid-to-long-term buy and sell pressure. It compares buying and selling volume over time and offers insights into market behavior at specific price points. Cumulative Volume Delta is effectively a continuation of the principles of Volume Delta but involves longer time periods and offers different trading signals.

Like the Volume Delta, the Cumulative Volume Delta (CVD) indicator measures the relationship between buy and sell pressure but does not focus on one specific candle in particular. Rather, the Cumulative Volume Delta takes the relative differences and combines them all over an extended time period.

Users have the ability Cumulative Volume Delta in various types of charts along with an optional smoothing line.

Placed above price bars options.




Interacting with price bar options helps to better identify CVD Divergences.

CVD Divergences

CVD reveals buying and selling trends that may or may not complement the price trend of the asset itself. Sometimes, price trends can run in contrast to trading behavior — sell volume can be dominant while the spot price is rising, and vice versa.





🔶 DETAILS

Theoretically, volume delta is calculated by taking the difference between the volume that traded at the ask price and the volume that traded at the bid price. The most precise calculation method uses tick data but requires huge amounts of data on historical bars, which usually limits the historical depth of charts. This indicator uses two different intrabar analysis methods for the ​volume delta calculation, where intrabars are chart bars at a lower timeframe than the chart's timeframe:

The logic used to assign intrabar ​volume to the "up" or "down".

- Buying/Selling pressure of the intrabar option (default)

(close - low) > (high - close) => UP(close - low) < (high - close) => DOWN(close - low) = (high - close) => close - previous close is used

- Polarity of the intrabar option

close > open => UPclose < open => DOWNclose = open => close - previous close is used

🔶 SETTINGS

The script takes into account user-defined parameters and performs calculations and presentations based on them, where detailed usage for each user-defined input parameter in indicator settings is provided with the related input's tooltip.

🔹 Calculation Settings

• Calculation Method: Calculation method selection, available options 'Intrabar Buying/Selling Pressure' or 'Intrabar Polarity'.
  
• Lower Timeframe Precision: Sets indicator precision, default option is 'Auto'.
  

🔹 Presentation Settings

• Volume Delta: Toggles the visibility of the Volume Delta
  
• Cumulative Volume Delta: Toggles the visibility of the Cumulative Volume Delta
  
• Volume Delta/Price Bar Divergences: Toggles the visibility of the Volume Delta Divergences
  
• Volume Delta Numerical Values: Toggles the visibility of the Volume Delta Numerical Values
  

🔹 Other Features

• Volume MA: Toggles the visibility of the Volume Moving Average
  
• CVD Smoothing: Toggles the visibility of the Cumulative Volume Delta's Smoothing Line
  

🔹 Volume Delta, Others

• Volume Delta: Positive, Negative: Volume Delta color customization options
  
• Volume Histogram: Growing, Falling: Volume Histogram color customization options
  
• Display Length: Length of the visual objects presented with this indicator
  
• Volume Delta Height: Volume delta height customization options
  
• Volume Histogram Height: Volume histogram height customization options
  
• Vertical Offset: Volume delta and histogram vertical positioning customization options
  

🔹 Cumulative Volume Delta, Others

• CVD Line, Width, and Color: Cumulative Volume Delta - Line Width and Color customization options
  
• CVD Area/Baseline, Gradient Coloring: Cumulative Volume Delta - Area and Baseline background gradient coloring customization options
  
• CVD Candles Color, Positive, and Negative: Cumulative Volume Delta - Candles coloring customization options
  
• CVD/Smoothing Background: Highlights and adjusts the transparency of the area between the Cumulative Volume Delta Line and it's Smoothing Line
  

🔶 RELATED SCRIPTS

Liquidity-Sentiment-Profile
EquiVolume
Volume-Footprint

Apr 15, 2024

Release Notes

- Fixed issue where error is thrown when CVD smoothing is disabled