Technical Indicators: V
Vertical Horizontal Filter
Created by Adam White, the Vertical Horizon Filter illustrates the trendiness of a particular equity. It helps display whether the stock is following a trend or a trading range.
If the Vertical Horizon Filter is rising, this may indicate a trend is forming. The higher the indicator, the better other trend-following indicators will work. Falling values may indicate that prices may be falling out of the trend and entering a congestion phase (the stock trades within a certain price range without much net up or down movement).
Volume
Simply put, Volume is the number of shares traded during any given period, usually hour, day, week, or month. It is the basic yet important analysis of volume that provides investors with an element of technical analysis. Volume can provide valuable clues as to the intensity of a given price move.
During consolidation periods low volume levels generally prevail. This is symptomatic of the indecisive expectations that typically occur during consolidation periods, times when prices move sideways within a fairly narrow strading range. Low volumes also often occur during market bottoms, another period of indecision.
High volume is characteristic of market tops when a consensus forms believing that prices will move higher. High volume is also very common at the start of new trends (i.e., when prices emerge from of a trading range). Just prior to market bottoms, volume will often increase due to panic-driven selling.
Volume can help determine the health of an existing trend. A healthy up-trend should have higher volume on the upward motion of the trend, and lower volume on the way down. A healthy downtrend usually has higher volume on the downward legs of the trend and lower volume on the upward (corrective) legs.
Volume Accumulation
Created by Mark Chaikin, the Volume Accumulation Oscillator shows the cumulative volume adjusted by the difference between the close and the midpoint of the day's range.
Compared to the On Balance Volume (OBV) indicator which assigns all the day's volume to the buyers if a security closes up or to the sellers if it closes down, Volume Accumulation uses the relationship of the closing price to the mean price to assign a proportion to the volume.
Use the Volume Accumulation Oscillator as you would the OBV and let volume confirm a trend. A rising price trend will be confirmed by a rising VA line. An uptrend paired with a rising Volume Accumulation line is considered bullish while a Volume Accumulation line that diverges from the price direction of movement should warn of a near-term price correction.
The formula for Chaikin's Volume Accumulation is:
VAC = Volume * ( Close - High + Low / 2 )
Volume by Price
Volume by Price is an excellent indicator combining both price and volume into one tool. The volume of trades is plotted onto the chart horizontally at price intervals. Volume by Price can be used to see which prices invoke the most volume and activity.
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This is useful in determining where the majority of historical trading volume occurred and help find meaningful support and resistance lines. Volume by Price can also help in picking price changes or reversals. A price change is usually associated with large volume so if the current price is hovering around a level of high volume expect a price direction change. Likewise, low volume can be associated with times of uncertainty or consolidation.
Remember, this is a very subjective measure. Volume by Price is never sufficient in and of itself to plan trades.
Volume Oscillator
The Volume Oscillator uses the difference between two moving averages of volume to determine if the overall volume trend is increasing or decreasing.
When the Volume Oscillator rises above zero the shorter-term volume moving average has risen above the longer-term volume moving average. This means that the short-term volume trend is higher (i.e., more volume) than the longer-term volume trend. Bullish signals stem from rising prices coupled with increased volume, and falling prices coupled with decreased volume. Alternatively, if volume increases as prices fall, or volume decreases as prices rise, the market is thought to be showing signs of underlying weakness.
The logic behind this strategey is that rising prices coupled with increased volume signifies more buyers which should lead to a continued move. Similiarly, falling prices coupled with increased volume (more sellers) should mean fewer buyers.
Volume ROC
Volume ROC (Rate of Change) is mathmatically identical to Price ROC only it displays the ROC of the security's volume rather than of its closing price.
The Volume ROC shows the speed at which volume is changing. This can be quite informative as almost every significant chart formation (tops, bottoms, breakouts, etc.) is accompanied by a sharp increase in volume.
The Volume ROC indicator is calculated by dividing the amount that volume has changed over the last n periods by the volume n periods ago. The result is the percentage that the volume has changed in the last n periods. When the volume is higher today than it was n periods ago, a positive number will result. If the volume is lower today than it was n periods ago, the ROC will be negative. This is written in formula form as:
( Volume - Volume n periods ago ) / Volume n periods ago
Volume+
Volume+ represents the volume of advancing issues. Use this measument to quantify the total volume of stocks that at the end of the day closed higher than their previous closing price.
Volume+ is generally viewed as an indication of buying pressure. When advancing volume expands it is generally viewed as bullish.
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