CVD Indicator: Cumulative Volume Delta Trading Guide

2025.12.04 2025.12.04
What Is CVD Indicator and How to Use Cumulative Volume Delta in Trading

Oleg Tkachenkohttps://www.litefinance.org/blog/authors/oleg-tkachenko/

The CVD indicator is a cumulative volume delta indicator that shows the net difference between buying and selling volume. It reflects how cumulative volume delta changes over time and helps traders gauge market sentiment by highlighting the balance between buying and selling pressure. Unlike many other volume indicators, the CVD indicator does not focus on the delta of a single candle. Instead, it accumulates the delta over a longer interval, allowing traders to track broader market trends and long-term price movements.

This indicator is mainly a supportive tool. It confirms breakouts of key support and resistance levels and can warn about a possible trend reversal when divergence signals appear on the chart. In this overview, you will find practical examples of cvd analysis and cvd patterns that can assist traders in developing a complete trading strategy and making stronger trading decisions.

Major Takeaways

• The CVD indicator is a tool based on cumulative volume delta. It shows the accumulated net difference between buying volume and selling volume over a chosen period.

• The indicator highlights which side dominates the market movements — buyers or sellers — helping traders assess market dynamics. This makes it possible to confirm the strength or weakness of a trend and anticipate potential reversals.

• CVD appears as a histogram that moves near the zero line. Red bars indicate stronger selling pressure, while green bars show increased buying pressure.

• A divergence can signal either a bullish or bearish reversal, depending on the direction of the mismatch. Rising histogram bars provide volume confirmation of breakouts. 

• The indicator is part of technical analysis and works best in trend-following strategies.

What Is the CVD Indicator?

The CVD indicator (Cumulative Volume Delta) is a cumulative volume delta indicator that shows the difference between accumulated buying volume and selling volume. It helps identify who dominates the market over time — buyers or sellers.

• CVD reflects the imbalance between the traded volumes of both sides. If the indicator rises, buying pressure is stronger; if it falls, selling pressure dominates.

• The CVD indicator helps identify hidden market trends, confirm a trend and its strength, and point to a potential reversal.

• CVD is used to detect divergences or to confirm existing trends. This technical analysis tool may show that the current price move lacks strength and may end quickly.

In most versions, the accumulated delta is displayed as a histogram under the price chart, moving around the zero line. Red bars indicate stronger selling pressure, while green bars suggest stronger buying pressure.

In some trading platforms, the histogram shows regular volume delta, while the accumulated delta is shown as a CVD line.

More details on cumulative volume delta in trading:

1. The market consists of sellers and buyers placing orders and choosing the size of the traded asset. If 10 buyers want to buy a total of 100 units at 50 USD and one seller agrees to sell 100 units at 50 USD, the trade is executed.

2. Sellers and buyers set their prices and order sizes freely. Their orders appear as limit orders in the order book. For example, buyer A wants to buy an asset at 45 USD, while seller B wants to sell the asset at 55 USD. These orders remain pending until the price reaches them under buying or selling pressure.

3. Some market participants trade at market prices. A seller sees liquidity at 45 USD and sends a matching order that executes immediately. These orders are called aggressive buying or selling (Market-Buy or Market-Sell).

4. Delta is the net difference between aggressive buys (executed at the ask price) and aggressive sells (executed at the bid price) for a candle. For example, aggressive buys equal 120 BTC and aggressive sells equal 80 BTC on the H1 time frame. Then, volume delta = 120 – 80 = 40, which means a positive delta as the buying volume is larger.

An aggressive market participant is a trader who initiates a trade at the market price, while a limit trader uses pending orders.

Delta reflects only aggressive buying or selling. If delta is positive but the price action does not rise, a large limit seller may be absorbing buys. If delta is negative while the price is stable, a large limit buyer may be holding the market.

5. Accumulated volume delta (CVD) is calculated as the difference between buying volume and selling volume, which is then added to the previous value, forming a cumulative volume chart. It represents the total delta from the start of the calculation period — a trading session, day, or any other time frame. For example, on the H1 time frame, if the delta for candle 1 is 40, for candle 2 is -10, and for candle 3 is 20, then the cumulative volume delta will be 40 – 10 + 20 = 50.

CVD helps evaluate the overall situation. If the period includes both bullish and bearish candles, CVD shows which side was stronger for the entire interval — buyers or sellers.

How Does Cumulative Volume Delta Work?

In general, the idea is simple: the larger the accumulated difference between buying volume and selling volume, the higher the histogram bar of the CVD indicator.

For example, if the accumulated buying volume increases by 10, 15, or 20 units each day, the histogram bars will continue to grow. When buying pressure rises, the price usually rises, too. If the bars start to decrease, sellers increase their selling volume, and the cumulative difference decreases.

Many volume indicators show only total volume without separating buyers and sellers. They confirm the strength of the trend and trading activity, but do not show which side has the advantage. Unlike them, CVD shows the actual difference between buyers and sellers, and each bar’s height reflects how much stronger one side is.

How to Read the CVD Indicator

Key signals of the cumulative volume delta indicator in trading:

• Crossing the zero line from below and a steady rise of histogram bars signal buyer dominance. If the calculation starts from the beginning of the trading session and H1 bars consistently grow, a long position may be considered. Note: There is a risk of entering late. For a downtrend, the signal is the opposite.

• Divergence. If the price sets a new high but CVD moves lower, a bearish reversal is likely. The price may keep rising due to isolated buy orders, but over time, sellers will have a higher traded volume than buyers.

• CVD is rising during sideways price action. If the market is in a range and CVD grows, hidden buying pressure may be building. This often happens during consolidation before a new upward impulse. Sellers may hold the price by absorbing orders, but buyer pressure increases gradually. This usually signals an upcoming breakout to the upside.

• Breakout confirmation of support or resistance. If the price breaks a key resistance level and CVD shows rising buying volume, long positions may be considered.

The indicator is auxiliary: it confirms signals from trend-following technical analysis tools and reversal patterns.

Formula of the CVD Indicator: Calculating the Cumulative Delta

The cumulative delta indicator is calculated using the accumulated net difference between aggressive buying and aggressive selling volume:

• CVD (total) represents the overall cumulative delta value.

• n is the number of candles. Settings depend on the platform version: in some cases, the calculation starts at the beginning of the trading session, while in others, the user may choose a specific market interval.

• Volume (Ask(i)) is the buy volume executed by aggressive buyers at the ask price for the i-th candle.

• Volume (Bid(i)) is the sell volume executed by aggressive sellers at the bid price for the i-th candle.

The indicator is not included by default in many platforms. In MT4, it must be installed manually as a volume-based trading indicator. You can download a free version here.

To install it, open “File/Open Data Folder,” go to MQL4/Indicators, and copy the .mql4 file.

Restart the platform. The indicator then appears in the “Custom Indicator” section.

Settings in this version:

• Source time frame for volume data. “Current” means the one displayed on the chart, but any interval from 1 minute to 1 month may be selected, depending on how professional traders or retail traders analyze price moves.

• Period for cumulative data calculation — the last 20 candles in the screenshot above.

• Smoothing method: No smoothing, or smoothing with a simple or exponential moving average.

• Smoothing period.

The settings may vary in other versions.

CVD Divergence Patterns

A divergence is one of the strongest signals of this indicator, which plays an important role in divergence detection. For example, if the price keeps rising but the buying volume decreases, the histogram becomes smaller. This creates a bearish divergence, often pointing to a downward price movement or potential trend reversals.

Bullish and Bearish Divergence

A divergence is a mismatch between price direction and indicator readings.

1. Bullish divergence: the price forms lower lows, while CVD forms higher lows.

Such bullish divergence occurs when buyers gradually increase their pressure, creating potential price movements upward and building strong buying interest. Then, the price rises, too.

2. Bearish divergence: the price forms higher highs, while the indicator forms lower highs.

The M15 chart above shows a sharp upward move in EUR/USD that occurred without news affecting market momentum, likely due to activity by institutional traders or large-cap traders.

The CVD indicator shows a rising positive CVD in favor of buyers, yet the price does not increase. High volatility and shrinking candle bodies indicate that the upward price momentum was only temporary. The price is trying to reach new highs, but CVD shows weakening buying activity, with falling highs forming a clear bearish divergence. At some point after another high, the price turns downward — a typical case of CVD divergence.

Tips for spotting divergence:

• Zoom out the chart. A divergence requires several consecutive extremes to form.

• Follow the trend on higher time frames. If you trade H1 and notice a divergence, switch to H4 to confirm the signal. 

• Use the most meaningful extremes to avoid forced line fitting.

• Consider fundamental factors. Major news can shift the market, especially in the cryptocurrency market, and may change the way the price moves.

Divergence is relatively rare but often potentially signals an upcoming upward reversal or a trend change.

Signals of Hidden Divergence

The idea of hidden divergence is also based on a mismatch between the price and the indicator. But unlike classic bearish or bullish divergence, hidden divergence confirms the current price trend rather than signaling a reversal. In other words, classic divergence warns of a trend change, while hidden divergence confirms continuation. The difference comes from how highs or lows are connected when plotting the lines.

Interpretation: aggressive sellers increase activity (the delta falls deeper), but the price does not drop. This means a limit buyer absorbs the pressure, supporting the upward trend.

A bullish hidden divergence is clearly visible in the picture below:

• 1 — a classic bullish divergence. The price touches support and moves upward.

• 2 — a bullish hidden divergence. The indicator’s lows continue to fall, the net selling volume increases, but buyer limit orders absorb all selling pressure. As a result, the price continues to rise. 

In this example, bullish hidden divergence confirms the classic divergence signal.

CVD Trading Strategy: Practical Applications

In this section, we will examine practical examples of two types of trading strategies in CVD trading: a trend-following strategy and a reversal-based approach. These trading approaches illustrate the basic idea of working with the indicator and are not standalone trading systems, as they do not account for fundamental factors and use only a minimal set of additional tools.

Confirming Trend Strength

The idea of this trading strategy is to identify a moment when trend indicators and patterns, after a trend reversal, signal a continuation of the price move and clarify the market’s direction. A rise in volume delta provides volume confirmation of the current trend.

The price rise is confirmed by an increase in the accumulated buyer volume, i.e., the stronger net buying volume (1).

Then the market moves into an overbought phase, and the number of participants willing to buy at the highest price declines. At the peak, the selling volume grows. The price drops and the accumulated delta falls as the selling pressure increases (2).

As the selling pressure strengthens, the accumulated delta turns into a negative CVD, and the negative values keep declining (3). However, in this case, the price remains within a range because a large pending buy order at this level absorbs the orders of aggressive sellers — a typical order-flow trading situation.

As the market continues to absorb the seller volume, the delta starts moving back toward an equilibrium (zero) value. More buyers enter the market, and the price begins to rise. The delta rise above zero confirms the upward trend and renewed market buying (4), giving traders valuable insights for more informed trading decisions.

Identifying Reversals and Breakouts

1. Reversal identification.

The idea of this trading strategy is to catch the moment when one side starts to lose strength after a trend move. Early signals include shrinking CVD histogram bars and the absence of drivers for trend continuation, both of which are useful for analyzing volume patterns and tracking short-term price trends.

AUD/USD, H1 time frame. There is a strong decline. CVD bars have crossed the zero line and continue to fall. This shows that the accumulated volume difference is growing in favor of sellers; the trend is confirmed, supported by CVD data and clear volume analysis.

Then a period of uncertainty begins. Buyers open long positions near the local correction low, close to the day’s price minimum, and the price temporarily turns upward. CVD shows that the selling pressure is rising again, but it is not enough to sustain the price decline. A support level forms.

A bullish divergence appears:

• A large buyer limit order is placed at the support level.

• CVD draws consecutive higher lows: there are still a few aggressive buyers, but even fewer sellers.

• The buyer’s limit order absorbs aggressive sellers’ counterorders, preventing the price from breaking support.

The key turning point is when the indicator crosses the zero line and green bars appear. The trend reverses upward because the buying volume finally exceeds the selling volume, even after a period of market aggression that favored the bears. Such setups are common in day trading, especially when high volume enters on the reversal.

2. Breakout identification.

The idea of this trading strategy is that a change in cumulative volume delta confirms a breakout of a resistance or support level, which is one of the practical cumulative volume delta measures in trend-following systems.

AUD/USD, H1 time frame. On lower time frames, it is convenient to spot divergences, but it is better to build trading systems on higher time frames to reduce false signals — this helps with making informed trading decisions.

The price is moving in a relatively wide range, and there is no clear signal about its next move. Near the support level, there appears to be a bullish divergence (1). The candles have small bodies, there is no downside breakout, and CVD shows selling pressure that is gradually fading. 

Candle (2) has a relatively large body, suggesting a possible rise in buyer demand. CVD confirms this. The only question is whether resistance will be broken.

On candle (3), there is a breakout, but it may be false. A gray line is drawn on the CVD chart based on the previous indicator highs. On candle (3), the histogram touches this level.

On the next candle (4), the price continues upward, and CVD keeps rising. A long position is opened, with an exit on candle (5). Two consecutive bearish candles and declining CVD bars indicate that the impulse is losing strength and a sharp drop may follow. This pattern can also appear after a failed market sell, when liquidity dries up, and institutional traders and small-cap traders step back.

Conclusion

The CVD indicator shows the accumulated volume of aggressive buyers and sellers. Pending limit orders are not included. This is an auxiliary indicator that traders use together with trend indicators and support and resistance levels. CVD is very sensitive to its settings, especially the number of candles used for calculation.

The indicator is interesting but complex, making it difficult to understand the trading mechanics. Try to learn as much as possible about it, choose settings in a strategy tester in combination with other indicators, for example, MACD and OBV, and test your skills on a demo account. Good luck with your trading, and keep an eye on volume patterns!