Velocity Pressure Index | AlphaNatt

Velocity Pressure Index (VPI) | AlphaNatt

A sophisticated momentum oscillator that combines price velocity analysis with volume pressure dynamics to identify high-probability trading opportunities.

📊 KEY FEATURES

• Dual Analysis System: Merges price velocity measurement with volume pressure analysis for comprehensive market momentum assessment
  
• Dynamic Normalization: Automatically scales values between -100 and +100 for consistent readings across all market conditions
  
• Adaptive Zones: Self-adjusting overbought/oversold levels based on recent price history
  
• Multi-Layer Confirmation: Combines momentum, acceleration, and crossover signals for robust trade identification
  
• Volume-Weighted Pressure: Differentiates between bullish and bearish volume to gauge true market sentiment
  

📈 HOW IT WORKS

The VPI calculates price velocity using linear regression of price changes, then weights this velocity by the difference between bullish and bearish volume pressure. This creates a momentum reading that accounts for both price movement speed and the volume conviction behind it.

Signal Generation:

1. Price velocity is measured over the specified period
   
2. Volume is separated into bullish (close > open) and bearish (close < open) pressure
   
3. Velocity is amplified or dampened based on volume pressure differential
   
4. The resulting index is normalized to oscillate between -100 and +100
   
5. A signal line smooths the oscillator for crossover detection
   

🎯 TRADING SIGNALS

Long Signals (Cyan #00F1FF):

• Strong Bull: VPI > Signal with positive momentum and acceleration
  
• Crossover Bull: VPI crosses above signal while above oversold zone
  
• Divergence: Price makes lower low while VPI makes higher low
  

Short Signals (Magenta #FF019A):

• Strong Bear: VPI < Signal with negative momentum and deceleration
  
• Crossover Bear: VPI crosses below signal while below overbought zone
  
• Divergence: Price makes higher high while VPI makes lower high
  

⚙️ CUSTOMIZABLE PARAMETERS

Velocity Settings:

• Velocity Period (14): Lookback for price velocity calculation
  
• Pressure Period (21): Volume analysis window
  
• Smoothing Factor (3): Final oscillator smoothing
  

Signal Configuration:

• Signal Type: Choose between SMA, EMA, or DEMA
  
• Signal Length (9): Signal line smoothing period
  
• Normalization Period (50): Range calculation window
  

Dynamic Zones:

• Zone Lookback (100): Period for adaptive overbought/oversold calculation
  
• Percentiles: 80th/20th percentiles for dynamic zones
  

📐 VISUAL COMPONENTS

• Main Oscillator: Color-coded line showing current momentum state
  
• Signal Line: White line for crossover detection
  
• Momentum Histogram: Shows velocity differential at 50% scale
  
• Dynamic Zones: Self-adjusting overbought/oversold bands
  
• Extreme Levels: ±50 dotted lines marking extreme conditions
  
• Background Shading: Subtle highlighting of overbought/oversold regions
  

💡 USAGE TIPS

1. Trend Trading: Use strong bull/bear signals in trending markets for continuation entries
   
2. Range Trading: Focus on crossovers near extreme zones for reversal trades
   
3. Divergence Trading: Watch for price/oscillator divergences at market extremes
   
4. Multi-Timeframe: Combine with higher timeframe VPI for directional bias
   
5. Volume Confirmation: Stronger signals occur with aligned volume pressure
   

⚠️ BEST PRACTICES

The VPI works best in liquid markets with reliable volume data. For optimal results, combine with price action analysis and use appropriate risk management. The indicator is most effective during trending conditions but can identify reversals when divergences occur at extremes.

🔔 ALERTS AVAILABLE

• VPI Long/Short Signals
  
• Bullish/Bearish Crossovers
  
• Extreme Overbought/Oversold Conditions
  

Version 6 | Pine Script™ | © AlphaNatt