If the Vertical Horizon Filter is rising, this may indicate a trend is forming. The higher the indicator, the better other trend-following indicators will work. Falling values may indicate that prices may be falling out of the trend and entering a congestion phase (the stock trades within a certain price range without much net up or down movement).

During consolidation periods low volume levels generally prevail. This is symptomatic of the indecisive expectations that typically occur during consolidation periods, times when prices move sideways within a fairly narrow strading range. Low volumes also often occur during market bottoms, another period of indecision.

High volume is characteristic of market tops when a consensus forms believing that prices will move higher. High volume is also very common at the start of new trends (i.e., when prices emerge from of a trading range). Just prior to market bottoms, volume will often increase due to panic-driven selling.

Volume can help determine the health of an existing trend. A healthy up-trend should have higher volume on the upward motion of the trend, and lower volume on the way down. A healthy downtrend usually has higher volume on the downward legs of the trend and lower volume on the upward (corrective) legs.

Compared to the On Balance Volume (OBV) indicator which assigns all the day's volume to the buyers if a security closes up or to the sellers if it closes down, Volume Accumulation uses the relationship of the closing price to the mean price to assign a proportion to the volume.

Use the Volume Accumulation Oscillator as you would the OBV and let volume confirm a trend. A rising price trend will be confirmed by a rising VA line. An uptrend paired with a rising Volume Accumulation line is considered bullish while a Volume Accumulation line that diverges from the price direction of movement should warn of a near-term price correction.

The formula for Chaikin's Volume Accumulation is:

This is useful in determining where the majority of historical trading volume occurred and help find meaningful support and resistance lines. Volume by Price can also help in picking price changes or reversals. A price change is usually associated with large volume so if the current price is hovering around a level of high volume expect a price direction change. Likewise, low volume can be associated with times of uncertainty or consolidation.

Remember, this is a very subjective measure. Volume by Price is never sufficient in and of itself to plan trades.

A traditional OBV calculation adds the days volume to a running sum if the price is above the previous days close, and subtracts it if the close is below the previous days close.

Because small random price movements can distort the underlying trend, a longer term indicator is necessary, which is where the VFI becomes useful.

The VFI is a long-term and open-ended indicator that will help assess the major trend and as such, should not be used as an overbought/oversold oscillator.

The VFI indicator had three properties:

1. Level - A level above zero is considered bullish and indicates accumulation over the previous six-month period. Values below zero indicate distribution. A cross of the zero line indicates that the balance of power is changing from the bulls to the bears and vice-versa
2. Divergences - Looking at changes in the VFI can help determine the quality of a price move. A divergence in volume can be evidence of a reversal. Divergence is often shown by a higher high non-confirming to the indicator. A trend may be losing momentum if the VFI fails to confirm a new high or low for a cycle.
3. Direction - Smoothing of an indicator with moving averages allows this indicator to ignore short-term fluctuations. A linear regression line may also filter out short-term noise.

When the Volume Oscillator rises above zero the shorter-term volume moving average has risen above the longer-term volume moving average. This means that the short-term volume trend is higher (i.e., more volume) than the longer-term volume trend. Bullish signals stem from rising prices coupled with increased volume, and falling prices coupled with decreased volume. Alternatively, if volume increases as prices fall, or volume decreases as prices rise, the market is thought to be showing signs of underlying weakness.

The logic behind this strategey is that rising prices coupled with increased volume signifies more buyers which should lead to a continued move. Similiarly, falling prices coupled with increased volume (more sellers) should mean fewer buyers.

The Volume ROC shows the speed at which volume is changing. This can be quite informative as almost every significant chart formation (tops, bottoms, breakouts, etc.) is accompanied by a sharp increase in volume.

The Volume ROC indicator is calculated by dividing the amount that volume has changed over the last n periods by the volume n periods ago. The result is the percentage that the volume has changed in the last n periods. When the volume is higher today than it was n periods ago, a positive number will result. If the volume is lower today than it was n periods ago, the ROC will be negative. This is written in formula form as:

Volume+ is generally viewed as an indication of buying pressure. When advancing volume expands it is generally viewed as bullish.