VolumeFlowIndicator

Description

The Volume Flow Indicator is a long-term trend following study which uses the same principle as On Balance Volume. However, instead of comparing two Close prices of adjacent bars, it compares change in typical price with a so-called "cut off" value based on standard deviation. After that, volume for each bar is taken into account with a sign: positive or negative, based on the mentioned comparison. The final result is exponentially smoothed ratio of cumulative sum of "directed" volume to average volume over last 50 bars.

Values above the zero level are considered bullish and indicate long-term accumulation. Vice versa, negative values indicate distribution, thus being a bearish signal.

The Volume Flow Indicator is also used for spotting divergence; divergence in volume might signify trend reversal. Trend might be losing momentum when the Volume Flow Indicator fails to confirm a new High or Low in a cycle.

Input Parameters

Parameter Description
length The number of bars used to calculate the Volume Flow Indicator.
max volume cut off The coefficient used in calculation of volume "cut off" value. Lower values of this coefficient mean stronger damping of volume spikes.

Plots

Plot Description
VFI The Volume Flow Indicator plot.
ZeroLine The zero level.

Example*

*For illustrative purposes only. Not a recommendation of a specific security or investment strategy.

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