Delta Divergence

Delta divergence occurs when the price of an asset moves in one direction while the net order flow, or delta, moves in the opposite direction. For example, if the price makes a new high but the cumulative delta ⎊ the net of buying versus selling volume ⎊ fails to reach a new high, it suggests a lack of institutional conviction.

This divergence often acts as a warning signal for a potential trend reversal or a pause in momentum. It highlights the discrepancy between price action and the underlying buying or selling pressure.

Traders use this to identify exhausted trends where the price is being driven by retail momentum rather than institutional accumulation. It is a powerful tool for filtering out false breakouts in volatile markets.