Walid Khalil's Volume Zone Oscillator (VZO) Aids Trend Identification and Buy/Sell Signals
Walid Khalil introduced the Volume Zone Oscillator (VZO) in 2009, with David Steckler joining him in a follow-up article in 2011. This indicator helps traders identify trends and buy/sell signals based on volume.
VZO categorizes daily volume as positive or negative, signaling a positive trend when it rises above 5% and a negative trend when it falls below this level. It's particularly useful in identifying overbought (above 60%) and oversold (below -60%) conditions. To enhance reliability, a 14-period average directional index (ADX) can be used alongside VZO.
Oscillations between 5% and 40% indicate a bullish trend zone, while those between -40% and 5% suggest a bearish trend. Readings above 40% hint at overbought conditions, while those below -40% signal oversold conditions. The exact formula involves calculating a daily variable 'R', smoothed with exponential moving averages, and multiplied by 100 to create a percentage scale.
VZO, introduced by Walid Khalil and further discussed by David Steckler, is a valuable tool for traders. It helps pinpoint trends and buy/sell opportunities based on volume, with clear signals for overbought and oversold conditions. When used with ADX, it can provide more reliable signals for trading decisions.
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