The Flow Indicator (VFI) was originally introduced by Markos Katsanos in June 2004 in the article of STOCKS & .
The VFI is based on the popular (OBV) but with three very important modifications:
Unlike the OBV, indicator values are no longer meaningless. Positive readings are and negative .
The calculation is based on the day’s median instead of the closing price.
A threshold takes into account minimal price changes and another threshold eliminates excessive .
The indicator takes into account only the latest 6 month action and not the entire data loaded in the chart.
A simplified interpretation of the VFI is that values above zero indicate a state and the crossing of the zero line is the trigger or buy signal.
The strongest signal with all indicators is of course divergence.
The classic form of divergence is when the indicator refuses to follow the price action and makes lower highs while price makes higher highs (negative divergence).
If price reaches a new low but the indicator fails to do so, then price probably traveled lower than it should have. In this instance, you have positive divergence. This indicator is also very useful for improving performance results in trading system design.
I used the code from Markos Katsanos and implemented it in PineScript.
- of the VFI which acts as reversal signal.
- color-gradient filling (PineCoders framework) for the range between the VFI and the signal .
- The bull & bear colors for the indicator are momentum based and configurable through user inputs.