Let's first learn what is Delta & How to Use Cumulative Delta Volume Bars?
Cumulative Delta Volume
Bars is one of the leading indicators that you can use when trading order flow. It gives you an instant
snapshot of the buying and selling pressure in a market.
After reading the detailed description of "Cumulative Delta Volume
Bars," you will understand how volume
delta provides a
critical edge by allowing you to spot significant potential reversals in the market. You will also learn to
use this Cumulative Delta indicator in depth. (including rest session usability features)
What is Delta Volume?
difference between Buying and Selling Power.
is calculated by taking the difference
between the volume
at the offer price and the volume
traded at the bid price. (in simple words,
the difference between buying pressure & selling pressure)
If delta volume
than zero, you have more buying pressure than selling & vice versa, and if delta volume
is less than zero,
you have more selling pressure than buying.
In Order-Flow Analysis
, traders used Cumulative Delta to measure the relationship
between the Buying & Selling pressure Vs Price.
Cumulative delta volume
takes the delta values for every bar and successively adds them together to provide a graph, as seen
Let me demonstrate by giving examples of how cumulative Delta can help measure the buying or selling
pressure relative to the price move.
★Trading Absorption & Exhaustion concepts with Delta
See the chart below & try to analyze the next possible move on the basses on the analysis mentioned on
If you said Short,
you were correct. ✅
Till Point A
, both price & cumulative were aligned. (means there were no imbalances
between Delta & Price).
But on Point B
, the Cumulative Delta broke the previous resistance clearly and moved even
further away from the resistance level
, but the Price couldn't break the
last resistance. It interprets that buyers applied a lot of buying pressure but no result.
(Aggressive buying pressure absorbed by Passive sellers)
Due to this vast effort or failed attempt, buyers were exhausted and had no more strength to pull the Price
up. That's why the Price reversed from Point B
. See below image
★Cumulative Delta Volume Bars is helpful when determining buying
or selling pressure at different key price levels, such as swing highs or lows.
Let's recap on swing highs and swing lows.
➽ A swing high (S.H) is formed when the high reaches higher than the price action around it. Once the Price
moves above a prior swing high and begins to retrace, a new swing high is formed.
➽ A swing low (S.L) is formed when the low reaches lower than price action around it. Once the Price moves
below a prior swing low and begins to retrace, a new swing low is formed.
➽ When the Price makes higher highs and higher lows, a market is considered an uptrend.
➽ When the Price is making lower lows followed by lower highs, a market is considered a downtrend.
When evaluating Delta, it's beneficial to compare delta values at swing lows or swing highs to
determine the amount of selling or buying pressure and how the market reacts.
The actual Power of Delta is revealed when we use it to determine the market's reaction to powerful
buying or selling. We want to see if the market has reacted as we would expect or not.
In the above Example, you will notice that every time price breaks a swing, Delta does as well.
It makes sense as it takes selling pressure to break a swing low or buying pressure to break a swing high.
In simple words, we can say that there is no anomaly between delta direction & price direction.
In simple words (No Absorption or Exhaustion)
But what's occurring when this isn't the case, and we have divergence between Price and Delta? Let's analyze
it with real examples.
★Understanding Delta Divergence.
(Lack of Harmony in Buying/Selling Pressure & Price Move)
Notice how the Price breaks out of the previous resistance level
on the above chart, but the Delta
didn't yet reach even close to its last resistance level
. It's a clear divergence between
Price and Delta. Buyers may be slightly exhausted at the previous resistance
, and Price & Delta may retrace slightly. But in a broader view, it reflects a
See the above chart & see when and why the Price moved. I hope it will help you understand the
underlying relation & story between Price & Delta.
Cumulative Delta & Trade Management
Delta will help you spot significant reversals, but it can also be used to help manage your open trade. You
want to see a high correlation between Delta and Price when in a long or short position.
Suppose you're short while the Price is breaking a new low. You want to see Delta breaking low if sellers
aren't interested in selling at the recent lows, represented by Delta not breaking lows. The probability of
a short term reversal or a significant retrace increases.
When in a position, always be on the lookout for exhaustion and absorption, signalling a reversal potential.
What Includes in V.C Cumulative Delta Volume Bars Indicator
Inputs & Settings
Reset accumulation on new session:
Allows you to rest accumulation at the start of each session (you may choose your customized starting &
ending time as well by enabling ''Customize Rest Session Time''
Start/End of Session & During Session:
Allows you to show/hide & choose the background color & separator of each session
''Customize Rest Session Time''
When this setting is enabled, your customized given time will be applied, which can be set from the below
box. Note: set your time in minutes. For Example, if you want to reset the session after every hour, you
need to put 60. If you're going to reset after every 8 hours, you need to put 480. Additionally, your chart
time frame must be lower than your customized rest time.
Reset Each Minutes:
Allows you to put your desired rest time in minutes. For Example, for 1 hour 60, for 8 hours 480. (8x60)
Allows you to choose rest time from the drop-down menu. Note:
To apply this setting, don't
enable the ''CUSTOMIZE RESET SESSION TIME''.
Allows you to set customized starting & ending times of the session instead of the exchange's default
time. For Example, the exchange reset time is 20:00, but if you want 22:00, first, you need to set your
chart time as an exchange from the right bottom of the chart, and then you need to put 22:00 22:00 in both
Put the same starting & ending time. In simple words, it should not be
greater than or less than 24 hours.
It allows you to select Delta type. (there are two delta types you can choose from, 1st Simple Delta, 2nd
Delta % or Volume
Allows you to change the color of candles.
Allows you to apply to Envelop Indicator on the delta candle. (all default settings of the Envelop Indicator
can be customized as well)
See the below chart with Envelop applied to Delta Candles & Price Candles. (can be used to measure
the Delta & Price movement at the micro-level)
Bollinger Bands Indicator:
Allows you to apply to Bollinger Bands
Indicator on the delta candle. (all
default settings of the Bollinger Bands
Indicator can be customized as well)
See the below chart with Bollinger Bands
applied to Delta Candles & Price
Candles. (can be used to measure the Delta & Price movement at the micro-level)
Start/End of Session on Chart
Allows you to change the first & last candle of the session.
Allows you to control all the visual settings of delta candles, Envelop & Bollinger bands
Bars is one of the leading indicators you can include as an order flow trader in your arsenal. It gives you
an inside look at buying and selling pressure and how the market reacts.
But Keep in mind, in trading & technical analysis
, nothing is 100% certain. No
indicator can give you a 100% success rate. There is no holy grail in the financial market. As a trader,
with the help of technical & fundamental indicators, our goal is to find an edge over the market.
A simple definition of an edge is:
Anything that adds a few points to the winning side of
an equation builds an edge that lasts a lifetime. A trading edge defines your technical or strategic
advantage in the highly competitive market environment. Traders can establish multiple edges by starting
with popular strategies and customizing rules to lower the risk of getting trapped with the emotional crowd.