Indicators  |  JUL 2000

Vertical Horizontal Filter by Jayanthi Gopalakrishnan

Vertical Horizontal Filter by Jayanthi Gopalakrishnan This filter can tell you whether a market is going through a trending or congestion phase, and whether you should use trend-following indicators if the markets are trending or congestion-phase indicators if markets are in a trading range. It's always a challenge to determine which indicator you should use to help you make your trading decisions. Markets go through various stages such as trending or congestion phases, and you cannot use the same indicators for all the different phases. As a result, you must identify the different phases of the markets before you can apply the indicator appropriate for that stage. The vertical horizontal filter (VHF), which was introduced by Adam White in 1991, is one indicator you can use to determine whether a security is going through a congestion phase or a trending phase. The VHF is not your typical indicator that gives you buy and sell signals; what the VHF does is help you decide which indicators to apply. During a trending phase, the vertical rise in prices is stronger than during a congestion phase. The VHF measures the vertical rise in prices over time. The calculation of the VHF indicator is relatively simple, and it is explained in the sidebar, ""The vertical horizontal filter.""

by Jayanthi Gopalakrishnan