Buy/sell pressure analysis, CVD trends, and absorption detection
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Delta Analysis — Strategy Guide
Understanding Delta
Delta is the difference between buying volume (trades at the ask) and selling volume (trades at the bid) at each price level. Cumulative Volume Delta (CVD) tracks this running total throughout the session. Delta reveals the aggressiveness of buyers vs sellers — something you can't see from price alone.
Key Concepts
Positive Delta — More trades at the ask (market buy orders). Indicates aggressive buying pressure.
Negative Delta — More trades at the bid (market sell orders). Indicates aggressive selling pressure.
Absorption — Large delta in one direction with minimal price movement. Indicates a passive participant absorbing the aggressive orders.
Trading Strategy
Confirmation: When price is rising and CVD is also rising, the trend is confirmed by aggressive buying. Trade with the trend.
Absorption: If price is at support and delta is heavily negative but price isn't dropping, a large passive buyer is absorbing the selling. This often precedes a reversal up.
Pro Tip
Watch for delta "flips" — when cumulative delta changes from negative to positive (or vice versa) within a session. These flips often coincide with significant turning points and can be traded as reversal signals.