Cumulative Volume Delta (CVD) is an indicator of changes in cumulative volume (delta), on the basis of traded volume between Active/Aggressive buyers and Active/Aggressive sellers (market buys vs market sells).
Cumulative Delta expands on Delta by recording and calculating the difference between the buy and sell volume.
Trades taking place on the "Ask" form buying pressure, which is then added to the Delta total. Trades on the "Bid" form selling pressure, and are then subtracted from the cumulative total.
CVD can also be used to specify the accumulation of delta in a period of your choosing.
Cumulative Volume Delta (CVD) is an indicator of changes in cumulative volume (delta), on the basis of traded volume between Active/Aggressive buyers and Active/Aggressive sellers (market buys vs market sells).
Cumulative Delta expands on Delta by recording and calculating the difference between the buy and sell volume.
Trades taking place on the "Ask" form buying pressure, which is then added to the Delta total. Trades on the "Bid" form selling pressure, and are then subtracted from the cumulative total.
CVD can also be used to specify the accumulation of delta in a period of your choosing.
This feature is strongly favoured by day traders and scalp traders, as CVD is a leading indicator it provides greater accuracy and confluence on LTF.
That being said CVD can be applied on any time frame.
When using CVD, one should be sure to note the levels of volume and pay attention to divergences in relation to price action.
Combined with other FootPrint tools, CVD provides another edge of confluence when analysing volume.
NOTE: Measure CVD for the exchange you are trading on (If ByBit, then use a ByBit chart with CVD).
Key Points of the Lesson
UTILITY
CVD = the running total of delta ⇒ adding and removing of the ongoing delta.
Important to look at delta alone, as well as CVD to look for divergences.
CVD divergences are very powerful, as you can see where the bigger traders are.
IMPLEMENTATION
Footprint software is needed, such as Exochart.
Look for divergences using the whole candle.
Full data setting recommended.
PRACTICAL EXAMPLE
TIPS & TRICKS
“Quick wick” divergences from one candle are not as reliable.
Divergences formed over a longer period of time indicate absorption.
CVD divergences have 2 stages:
The possible divergences form
Confirmation ⇒ price moves away, leaving trapped traders behind, and market structure changes.
EXAMPLE BULLISH CVD DIVERGENCE
There is a move to the downside and the price goes sideways for a period of time and then attempts to move down again. Price forms a higher low but CVD makes a lower low. This shows us there are more people market shorting over the period of the higher low on price than at the lower low. Also, that shows us there is/are a bigger trader(s) with a big limit order(s) absorbing all of the market sells. Confirmation of a long would be a break of MS.
EXAMPLE BEARISH CVD DIVERGENCE
Price is making lower highs while CVD is making higher highs. This show people are aggressively market buying but the price is unable to take the high because there is/are a bigger trader(s) absorbing all the buys with the limit order(s). Confirmation of a short would be a break of MS.
TIPS & TRICKS
Delta can lead the price.
Initial CVD divergences do not materialise, and price action “catches up” or “follows” delta.
Context is key ⇒ monitor delta, volume, and rotation times of the range, as well as other tools.
Training and experience are needed to identify CVD divergences correctly.
They can be used on any time frame, though low time frames up to 1 hour are recommended.
No “hidden” CVD divergences ⇒ simply bullish or bearish.
TAKE HOME MESSAGE
CVD is the running total of delta.
Divergences caused by bigger traders with limit orders.
Two steps for divergences to confirm.