Vertical Horizontal Filter [VHF]

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The Vertical Horizontal Filter function determines whether a field is in a trending or trading phase by analyzing the difference between the highest and lowest values versus daily fluctuations. Parameters ------------------ Data          The data to use in the calculation. This is typically the closing price. Period        The number of bars of data to include in the calculation, including the current value.                   For example, a period of 3 includes the current value and the two previous values. Note that while this function is intended for use with these specific values, any values can be used for these parameters, including other price values and averaged prices. Indicator Value ------------------------ The Vertical Horizontal Filter is calculated by taking the difference between the highest price and the lowest price for the given period and then dividing that value by cumulative bar-to-bar changes in the price over that period. Higher values indicate prices are more likely to be trending. Lower values indicate prices are more likely to be relatively level or congested. The value of the Vertical Horizontal Filter is not defined at the beginning of the data series until enough values are available to fill the period. Usage ----------- The Vertical Horizontal Filter (VHF) is primarily used to detect trending versus trading prices. This is important since some indicators work well in trending markets, while others work well in trading markets. However, most indicators do not typically work well in both types of markets. This indicator can be used to detect the current state of the prices. Since higher values indicate that prices are trending, the VHF can be used as a relative weighting for which type of indicator should be used. For example, since the MACD indicator works better in trending markets, it could be used only when the VHF is above a certain level. This indicator can also be used to detect the trend in the state of the prices. For example, as the value of the VHF increases, the prices could be moving towards a trending market. Source ------------ This indicator is based on an entry in "Technical Analysis From A To Z" by Steven B. Achelis. It was originally developed by Alan White.