Indicators | JUL 2004
Volume Flow Indicator Performance by Markos Katsanos
Volume Flow Indicator Performance by Markos Katsanos Find out how well the volume flow indicator performs in this, the second of a two-part series on the VFI. Last month, I introduced a long-term money flow indicator I call the volume flow indicator (VFI). The VFI is based on the on-balance volume† (OBV), but with three important modifications: • Positive readings indicate a bullish state and negative readings a bearish state. • The calculation is based on the day’s median instead of the closing price. • A threshold was introduced to take into account minimal price changes and another threshold to eliminate excessive volume. To assess the efficacy of the new indicator and whether the modifications added any value, I tested VFI against OBV, the buy and hold method, and a price-based indicator. In order to evaluate the new indicator’s properties, I conducted tests using divergence, direction, and indicator level signals separately. The same tests were repeated substituting VFI with OBV and a price-based indicator.
by Markos Katsanos
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