A Volume-Weighted Delta Proxy for Divergence Analysis

Summary

This indicator estimates buying or selling pressure from each candle’s close within its high-low range, multiplied by tick or real volume. It sums those estimates over a rolling period, scales the cumulative value by its recent standard deviation, and smooths the result into an oscillator. The document describes positive readings as recent buying dominance and negative readings as selling dominance, with distance from zero reflecting relative strength against the oscillator’s own history.

It identifies regular bullish or bearish divergence by comparing confirmed price swing lows or highs with the oscillator’s corresponding swings. Since swing points require bars on both sides, divergence marks appear after a delay. The suggested use is as a warning to manage an existing position or as confirmation alongside market structure, rather than as a standalone countertrend entry. The method is a candle-based proxy, not actual order-flow data; its reliability depends on the volume feed and may be weaker in thin markets. The article provides settings and usage guidance but no backtest or performance evidence.

Key ideas

• The indicator approximates bar-level delta using close location within the range and volume.
• Rolling summation, standard-deviation scaling, and smoothing create a normalized oscillator.
• Bullish and bearish divergence compare matching confirmed price and oscillator swing points.
• Swing confirmation introduces a lag, so arrows identify past pivots rather than immediate signals.
• The document recommends combining divergence with trend and structure context.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.