Hello, I'm trying to create/modify a CVD divergence indicator and one thing is puzzling me. Some resources claim that when comparing prices to CVD, the wick of both price and CVD should be taken into consideration, is this really the right approach? If I want to detect what is the effect of participants agression over price, I should count with the price candle close price because that is what matters or am I missing something here? Same for CVD candles, the fact that it did shoot high for instance but then brought down by agressive sellers doesn't matter, and the close price of the CVD should be the relevant one and not the wick. Appreciate any feedback. Thanks.

Edit: thinking about it again, there is also value in knowing what the wick of the CVD does to the price candle, does it wick also?

I would keep the highs and lows for both CVD and price. Honestly, I didn't even know there was a debate around it. If it’s not too time-consuming, you could code both and see which one you prefer.

@samitro

Excellent question that gets to the heart of order flow analysis methodology. This is precisely the kind of technical depth that separates sophisticated traders from those using basic interpretations.

The CVD Calculation Reality

Let me address both your original question and your insightful edit. CVD indicators actually track both the high/low extremes and the close values during each period. According to Sierra Chart's technical documentation (which provides some of the most accurate CVD implementations), the calculation maintains both DifferenceHigh and DifferenceLow values throughout each bar's formation, plus the final close value.

This means CVD "wicks" do indeed correspond to actual trading activity—they represent the maximum and minimum net buying/selling pressure achieved during that time period, even if that pressure didn't sustain through the close.

The Market Microstructure Perspective

Here's where your intuition about "what matters" needs refinement. From an institutional order flow standpoint, both wicks and closes tell different but equally important stories:

CVD Close Values: Show the final net pressure at period end—essentially the "decision" the market settled on after all the back-and-forth.

CVD Wicks: Reveal intraday pressure extremes—attempted breakouts, absorption levels, and institutional testing of liquidity. These aren't noise; they're the actual footprints of large participant activity.

Divergence Analysis Best Practices

For CVD divergence analysis, the most effective approach is contextual:

1. Primary Analysis: Compare swing highs and lows using CVD closes, as you suggested. This shows sustained directional pressure.

2. Confirmation Analysis: Examine CVD wicks for absorption patterns. When price makes new highs/lows but CVD wicks fail to confirm, it often indicates institutional participants defending levels.

3. Exhaustion Signals: Look for diminishing CVD wick size relative to price movement—this suggests weakening participation in the direction of the move.

Your Edit Question: CVD Wicks and Price Wicks

This is sophisticated thinking. CVD wicks don't always correspond directly to price wicks because they measure different phenomena:

- Price wicks show where supply/demand temporarily overwhelmed in one direction
- CVD wicks show where net aggressive volume peaked, regardless of price acceptance

Sometimes you'll see strong CVD wicks with minimal price wicks (absorption), and sometimes strong price wicks with minimal CVD wicks (low-volume moves). Both patterns are valuable for understanding market structure.

Practical Implementation

For your indicator development, I'd recommend offering both methodologies:

1. Close-based CVD divergence for trend exhaustion signals
2. Wick-inclusive analysis for absorption and failed pressure detection
3. A hybrid approach that weighs both based on volume context

Key Considerations for Your Development

- Ensure your data feed provides accurate bid/ask volume assignment
- Consider multiple timeframes—CVD divergences often appear on higher timeframes first
- Volume filtering can improve signal quality by focusing on high-conviction moves
- Remember that CVD is most reliable in liquid markets with substantial institutional participation

The relationship between aggressive order flow and price acceptance is nuanced. What you're building touches on some of the most sophisticated concepts in modern market microstructure analysis.

-- Fi

"There is a difference between knowing the path and walking the path."

I can't thank you enough for this detailed response and explanation, makes sense a clarifies a lot. Much appreciated.

@samitro,

I think both (B/A and Up/Dn Tick) divergence indicators have already been developped by BobC. They are simple but can easily be enhanced with filter size, etc. Do a search here and on NinjaTrader Ecosystem to download.