The Oscillator (KVO) is a trading indicator that uses both price and to identify potential longer-term trend reversal points in the markets. Introduced to the trading community by Stephen , this indicator measures the trend of cash flow based on and price movements. In this version, I enhanced it with better indicator colorful bars and better trading strategy to have entries and exits, which can be called as Better Oscillator (BKVO)
Although it is designed to measure the longer-term cash flow trend, it can also exhibit short-term fluctuations. This may sound confusing, but a simple version of the calculation can be better explained as follows:
- The moves through the market in each period
- Price movements, no matter how small they are taken into account
- The oscillator uses the lowest, highest, and closing prices
- The calculation is based on price and and is called force (VF).
- We then get an oscillator derived from the VF Slow 55 and Fast 34 (plus a 13 signal line).
There are four main ways traders use the BKVO to trade in the markets:
- Trend direction
- Buy and sell trading signals
- Bullish and divergence
- Colorful bars to indicate trend status
When using the oscillator for trend, there are two ways to do it. The first method is to wait for the KVO indicator line, not the signal line, to cross the zero line.
Traders can also use an intersection of the signal line with the KVO line as a directional sign. It's a little more aggressive.
Traders would only consider long or short trades depending on the KVO line relationship with the zero line. Aggressive traders can buy or sell when the trend changes, keeping their strategy objective.
Buy and sell trading signals
When we use the actual trading signal indicator we are using the signal line the same way we would trade the moving average convergence divergence ( ) crosses. If you traded every crossover, you can see that you are in draw down and caught in whipsaw. This is not the way to use the original version of KVO as a strategy. Due to original version may produce too many fake crosses. I prefer to use bars to display the trends with proper entry and exit alerts. However, it could be better if you can use your own experience and skills to utilize this indicator subjectively besides inherent alerts provided.
Klinger Divergence Trading
Divergence is essentially technical indicators showing one direction and price doing another. If you see the price chart heading upwards while the indicator has crossed the signal line and heading towards zero. This would be divergence. is the opposite. I designed divergence indicator inside. However, they are turned off in default and you have to turn them on by yourself if you think they are helpful.
has to be the most underrated market variable used in . But if you know how to analyze and interpret them, you can watch market turning points develop and anticipate setbacks and trend changes. You can find out if the pros are buying or selling by analyzing:
The colorful bars improves your typical histogram by coloring the bars based on 5 criteria:
- Volume Climax Up - high , high range, up bar (red)
- Volume Climax Down - high , high range, down bar (white)
- High Churn - bars with high and low range (green)
- Low - bar for low (yellow)
- Volume Climax plus High Churn - both of the above conditions (fuchsia)
- When there are no signals, the default color of the histogram bar is cyan/aqua.
KVO Climax up/ Peak Up (Red Bar)
Climax Up bars are identified by multiplying the buy (traded on ask) by the range and then looking for the highest value in the last 8 bars (default setting). Climax Up bars indicate a large demand leading to rising prices. By default, the bars are colored red.
climax up bars are typically displayed when:
- The starting signal for upward trends
- The end of the uptrends and Pullbacks during downtrends.
- The beginning of an uptrend is almost always marked by a Climax Up bar.
This shows that buyers like to get in and bring large quantities to market and raise prices quickly. A valid breakout should be followed by further buying, but occasionally it will test the low of the climax up bar.
Market highs are also indicated by Climax Up bars, often with high and / or low test patterns. Trend changes usually take a while to develop, so don't get pulled into it too soon - wait for the market to run out. One useful signal to look out for is the low bar - this shows that there is finally no demand and the market is likely to stop moving.
During a downtrend, pullbacks are often indicated by Climax Up bars. These show short covers or traders calling a bottom too quickly. As soon as this Climax decreases, the downward trend is likely to continue. The continuation of the downtrend is confirmed when the low of the Climax Up bar is taken out.
KVO Climax Down/ Peak Down (White Bar)
Climax Down bars are essentially the opposite of Climax Up bars.
Climax Down bars are identified by multiplying the sales (traded at bid) by the range and then finding the highest value in the last 8 bars (default). Climax Down bars indicate a large supply that is pushing prices down. The default setting is the white color of the bars.
climax down bars are usually displayed when:
- The beginning of the down trends
- The end of the down trends and Pullbacks on uptrends.
- The beginning of a downtrend is almost always marked by a Climax Down bar.
This shows that the sellers are happy to join in and that large quantities come onto the market and that prices are quickly depressed. A valid breakdown should be followed by more sales, but occasionally the high of the Climax Down bar is tested.
Market lows are also indicated by Climax Down bars, often with low churn and / or test patterns. Trend changes usually take a while to develop, so don't get pulled into it too soon - wait for the market to run out. One useful signal to look out for is the low bar - it shows that there is finally no supply and the market is likely to stop falling.
During an uptrend, pullbacks are often indicated by Climax Down bars. These show profit taking or traders calling a top too quickly. As soon as this Climax drops, the uptrend will likely resume. The continuation of the uptrend will be confirmed when the high of the Climax Down bar is removed.
KVO High churn (Green Bars)
High churn bars are identified by dividing the by the high to low range of the bar and then looking for the highest value in the last 8 bars (default). High churn bars indicate profit taking, new supply at the top, or new demand at the bottom of the market. The standard setting is that the bars of the histogram are colored green.
High churn bars are typically seen at:
- The end of the uptrends
- The end of the down trends and Mid-trend profit-taking.
- When churn is high, it means that demand is being met by new supply on top or supply is being met by new demand on the bottom - the price cannot actually go up when new supply or demand comes into the market. Hence the bar is low from top to bottom.
Occasionally Climax (up or down) and High Churn bars coincide and these bars are magenta in color. Beware of intra-day charts. The high churn often occurs on the last bars of the trading day. This does not necessarily represent a possible turning point, but a high of day traders closing positions.
KVO Low (Yellow Bar)
Low bars are identified by looking for the lowest in the last 8 bars (default). Low bars indicate a lack of demand at the highs or a lack of supply at the lows. The default setting is to color the bars yellow.
Low bars are usually displayed when:
- The end of the uptrends
- The end of the down trends and Pullbacks right in the middle of the trend.
- Low bars are important indicator signal for trend reversal. They are very useful for confirming indicators of a change in trend direction when the market is testing a high or a low.
KVO High Churn + Climax (Fuchsia Bar)
This is a mixture of KVO High churn (Green Bars) and KVO Climax up/ Peak Up (Red Bar) or KVO Climax Down/ Peak Down (White Bar).
KVO No Signal (Cyan/Aqua Bar)
There is no featured signal produced by the indicator.
This is a Level 4 invite-only and closed source indicator.
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