Volume Pressure Oscillator

The Volume Pressure Oscillator (VPO) measures whether recent volume is mostly supporting up days (buying pressure) or down days (selling pressure). Readings above +5 indicate strong positive volume pressure, while readings below −5 indicate strong negative pressure.

VPO signals are most useful as confirmation around price structures: breakouts with VPO > +5, pullbacks in an existing uptrend where VPO remains positive, or bottom formations where VPO turns from negative to positive. In these cases, volume is aligned with the price move, increasing the probability of trend continuation.

Signals are less reliable in choppy, range-bound markets, on illiquid instruments, or during news-driven spikes, where volume and price can be erratic. A false signal occurs when VPO crosses above/below the threshold but price fails to follow through and quickly reverses. For best results, always use VPO together with trend filters (e.g., moving averages), support/resistance, and market context, rather than as a standalone buy/sell tool.

How VPO works (brief)

• VPO > 0: Recent volume is dominantly on up days (buying pressure).
  
• VPO < 0: Recent volume is dominantly on down days (selling pressure).
  
• +5 / −5: Default critical thresholds where signals and “D” markers appear.
  
• The MA line of VPO helps filter noise and highlight more durable pressure.
  

Situations where signals are interesting
Use VPO as confirmation or early warning around price structures you as already identified (breakouts, bases, trends).

1. Breakout with strong positive volume pressure

• Price breaks a resistance or a consolidation zone.
  
• VPO crosses above +5 and stays in the bullish zone for several bars.
  
• The MA of VPO is rising or above zero.
  

Interpretation:
Buyers dominate the tape, the breakout has real volume behind it. This is often a good context to consider entering or pyramiding, especially if:

• Trend is already up (above 50/200 MA).
  
• Broader market is also bullish.
  
• There is no major overhead resistance immediately above.
  

2. Pullback in an uptrend with VPO staying positive

• Price pulls back modestly but remains in an uptrend (higher highs / higher lows, MA up).
  
• VPO dips but stays above zero or quickly recovers above +5.
  
• No heavy negative VPO spikes below −5.
  

Interpretation:
Selling is more like a pause than real distribution. This context can justify buying the dip or adding, as long as your risk management (stop, position size) is clear.

3. Reversal from a bottom with positive VPO shift

• After a downtrend, price forms a base, double bottom, or tight range.
  
• VPO moves from negative territory to above +5 for the first time in a while.
  
• The MA of VPO turns up and crosses above zero.
  

Interpretation:
Volume starts supporting the upside. It can be an early sign of accumulation. This becomes interesting if:

• Price confirms with a breakout above the base.
  
• The market context is improving (index strength, sector rotation).
  

Situations where signals are not very useful
VPO alone should not drive decisions in noisy or structurally weak contexts.

1. Range-bound / choppy markets

• Price oscillates in a flat range without clear trend.
  
• VPO frequently crosses +5 and −5 without sustained direction.
  

In that case, many “D” signals will just correspond to minor swings inside a range. They can be taken as short-term trading hints, but not as strong investable signals.

2. Very low volume assets or illiquid markets

1. Spreads are wide, volume is sporadic.
   
2. A few orders can push both price and VPO sharply.
   

In such cases, VPO can overreact and produce apparent “signals” that are just random prints in an illiquid order book.

3. Strong news-driven spikes

• Earnings, takeover rumors, macro announcements.
  
• Volume explodes, VPO spikes, but price behavior is abnormal and highly volatile.
  

The indicator will show strong volume pressure, but the risk profile is different (gap risk, slippage, abnormal volatility). Signals here are more “informational” than investable, unless you have a specific event-driven strategy.

What is a false signal with VPO?
A false signal is when VPO suggests a strong directional edge, but price action fails to follow through or quickly reverses.

Typical patterns of false signals:

• VPO crosses above +5 (bullish “D”) near resistance, but:
  
  
• - Price fails to break out or immediately rejects the level.
  
• - Next bars show a quick drop back below zero or even below −5.
  

• VPO crosses below −5 (bearish “D”) after an extended selloff, but:
  
• - Price quickly rebounds and forms a V-shaped recovery.
  
• - No continuation downside despite “strong” negative volume.
  

How to reduce false signals:

• Always combine VPO with:
  
• - Trend filters (MA 50/200, higher highs/lows).
  
• - Key levels (supports, resistances, bases, breakouts).
  
• - Broader market/sector context.
  

• Give more weight to signals:
  
• - That align with the prevailing trend.
  
• - Where VPO stays above/below the threshold for several bars.
  
• - Where the VPO MA confirms the direction.