Volume CVD and Open Interest Heatmap

Hello Traders,

This advanced visualization tool takes Volume and Open Interest data to the next level by creating a dynamic 'heatmap'. The indicator applies a color gradient and plots boxes from the source candle to the current candle, according to one of the following data sources:

  • Volume: Represents the total volume of both buy and sell transactions.

  • Up Volume: Represents the total volume from buy transactions only.

  • Down Volume: Represents the total volume from sell transactions only.

  • Up/Down Volume (Net): Shows the difference between the Buy Volume and Sell Volume.

  • Cumulative Delta: Represents the sum of the up/down volume for the previous 14 bars.

  • Cumulative Delta EMA: Provides a smoothed average of the sum of the up/down volume for the previous 14 bars, over a 14-period EMA.

  • Open Interest: Utilizes a user-defined ticker, whose value is added to the plot. While this is primarily designed for Open Interest tickers, it can be adapted to display any ticker of your choice. For instance, you might wish to display the DXY (US Dollar Index) while charting Bitcoin.

You have the option to define the lookback period, but it's important to ensure your timeframe for volume source data is high enough to accommodate the lookback. Bear in mind, TradingView fetches only 5000 candles worth of data, so if you're using 1 min volume data, you can only lookback around 83 hours.

While Volume and Open Interest share similarities, they aren't identical.

Volume indicates the trades that have been executed and shows the buy/sell direction. It provides insight into the market's strength, sentiment, and volatility.

Open Interest, on the other hand, represents the value of open trades that are yet to be closed. It doesn't show direction but does offer insight into the market's momentum and liquidity.

The unique aspect of this heatmap visualization is that it allows you to pinpoint where all that liquidity and open positions originated from. This could indicate potential areas of resting liquidity below.

For more detailed information, please consult the PDF below:

Just remember that while such tools can provide valuable insights, trading always involves risk and no tool can provide guaranteed results.

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