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 Foot Print 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).
Time Stamps
3:43 – BNB/BTC Previous COTW (DO NOT TRADE THIS)
13:27 – CVD
- CVD stands for cumulative volume delta, so it is running a total of the delta.
- CVD is adding and removing delta together
- EXAMPLE: we are on 1H TF and we start with a 12 mil delta (CVD is 12). The next candle has 57 mil delta, which gives a CVD of 69 (12+57). The following candle is -7.8 mil delta so CVD is now about 61 and so on.
- Daniel likes to look at delta alone and also CVD delta to look for divergences in price.
- For CVD type he has a setting ‘Full data’ which calculates everything while ‘Session’ resets it to zero at the start of every day.
- CVD divergences are very powerful indicators because we can see what bigger traders are doing
- Passive orders at limit provide liquidity to the market and one can get paid for providing liquidity to the market (whereas market orders are expensive).
- We want to see divergences build up over a period of time, rather than a one candle drop/wick/stop run that forms a divergence. Also as CVD is calculated using the whole candle we look at divergences using the whole candle.
23:40 – BULLISH CVD DIVERGENCE
- EXAMPLE: 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.
28:11 – BEARISH CVD DIVERGENCE
- EXAMPLE: 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.
32:17 – CVD ‘QUICK WICK’ DIVERGENCES
- There is a very quick wick to the downside which forms a divergence. Daniel never trades off of this, he likes to see the divergences form over several candles which shows absorption.
37:33 – CVD ‘CONFIRMATION’
- CVD divergences have two steps
- The possible divergence forming
- Confirmed divergences (price starts to move away after they have formed and those traders are trapped). Daniel likes to see how many trapped traders there are. If there is decent volume.
- Sometimes you will see instances of delta leading price. It will look like CVD divergences are forming only for a price to then follow/ catch up. Monitor delta, volume of the range, time taken for each rotation, other confluences + CONTEXT.
- Not all divergences play out so do not blindly short/long. It takes time and experience to recognise which ones to trade and which ones to believe delta is leading.
44:05 – CVD/DELTA LEADING PRICE
- Sometimes it looks like there are bearish divergences are forming but then price catches up with the delta and shortly breaks up too. So, waiting for confirmation is one option but understanding the content of what price is doing when at the high, and how it approached the high is the next level.
- MS is crucially important – when price changes MS or moves down from the high on an increase of negative delta it means bears have taken control after trapping longs at the high.
- CVD divergences can be traded on any TF.
59:20 – EXAMPLE OF SFP
1:01:50 – Q&A
- Focus on the exchange you are trading on
- Daniel only trades the two divergences he mentioned here
- The advantage of waiting for confirmation is that you are less likely to get stopped out (you make less money but you are less likely to lose money)
1:25:29 – BTC TA