is considered an important factor as it show the trading activity of a security, securities with higher are more attractive to trade as higher is in general present with larger price variations, higher can also indicate a better trade execution.
In the PVNO, the rescaled is represented by the blue plot while the rescaled price is represented by the (green/red) plot. The rescaling method used here is simply based on the sum of the current and past momentum output of a series of observations divided by the sum of the current and past absolute value of this momentum, this allow to have a smooth output with values reaching 1 and -1 instead of converging toward 0.
The indicator has two settings, Volume Length who control the length of the sum of the rescaled , while Price Length control the sum length of the rescaled price. When the rescaled is positive it means that the sum of the current and past Volume Length - 1 positive momentum values is greater than the sum of negative ones, this indicate a more active market. The same apply to the rescaled price, with a positive rescaled price value indicating an uptrend and negative values indicating a downtrend.
Because of the stationary and periodic nature of , low values for Volume Length are recommended.
INTERPRETATIONS AND USAGES
As you can see the rescaled price plot can have two colors, and the area between the rescaled and price plot is filled with two possible colors as well, the color depend on the following simple condition:
- green: once rescaled price > 0 and rescaled > 0 until condition for red don't happen
- red: once rescaled price < 0 and rescaled > 0 until condition for green don't happen
Therefore no signals are triggered if the rescaled price is greater/lower then 0 but the rescaled is lower than 0, this could allow to filter various false signals (at the cost of reactivity). A more interesting use-case of the indicator can be based on the upper and lower constant levels displayed in order to spot points where will fall or rise.
can also be used to spot potential reversals, therefore the levels can also be used to this end as well.
A normalized oscillator plotting rescaled price and values has been presented, the indicator posses its own trading rules but can easily modified. This is not an indicator i'am super proud of, even after passing some time on it lol. You can use the code freely without asking for permission, mention is appreciated.
Next indicators should be more pertinent and interesting, thanks for reading !
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