[blackcat] L4 Better Stephen Klinger KVO

Level: 4

Background

The Klinger Volume Oscillator (KVO) is a trading indicator that uses both price and volume to identify potential longer-term trend reversal points in the markets. Introduced to the trading community by Stephen Klinger, this indicator measures the trend of cash flow based on volume and price movements. In this version, I enhanced it with better volume indicator colorful bars and better trading strategy to have entries and exits, which can be called as Better Klinger Volume Oscillator (BKVO)

Function

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 Klinger calculation can be better explained as follows:

• The volume moves through the market in each period
  
• Price movements, no matter how small they are taken into account
  
• The Klinger oscillator uses the lowest, highest, and closing prices
  
• The calculation is based on price and volume and is called volume force (VF).
  
• We then get an oscillator derived from the VF Slow 55 EMA and Fast 34 EMA (plus a 13 EMA 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 bearish divergence
  
• Colorful volume bars to indicate trend status
  

Trend direction

When using the Klinger 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 (MACD) 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 volume 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 Klinger indicator has crossed the signal line and heading towards zero. This would be bearish divergence. Bullish 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.


Colorful volume bars

Volume has to be the most underrated market variable used in technical analysis. 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:

• Transaction volume at the bid or ask price
  
• High to lower area of ​​the bar and
  
• Average trade size.
  

The colorful volume bars improves your typical volume histogram by coloring the bars based on 5 criteria:

• Volume Climax Up - high volume, high range, up bar (red)
  
• Volume Climax Down - high volume, high range, down bar (white)
  
• High Volume Churn - bars with high volume and low range (green)
  
• Low Volume - bar for low volume (yellow)
  
• Volume Climax plus High Volume Churn - both of the above conditions (fuchsia)
  
• When there are no volume signals, the default color of the histogram bar is cyan/aqua.
  

Key Signal

KVO Volume Climax up/ Peak Up (Red Bar)

Volume Climax Up bars are identified by multiplying the buy volume (traded on ask) by the range and then looking for the highest value in the last 8 bars (default setting). Volume Climax Up bars indicate a large volume demand leading to rising prices. By default, the bars are colored red.

Volume 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 Volume 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 volume climax up bar.
Market highs are also indicated by Volume Climax Up bars, often with high volume and / or low volume 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 volume 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 Volume Climax Up bars. These show short covers or traders calling a bottom too quickly. As soon as this Climax volume decreases, the downward trend is likely to continue. The continuation of the downtrend is confirmed when the low of the Volume Climax Up bar is taken out.

KVO volume Climax Down/ Peak Down (White Bar)

Volume Climax Down bars are essentially the opposite of Volume Climax Up bars.
Volume Climax Down bars are identified by multiplying the sales volume (traded at bid) by the range and then finding the highest value in the last 8 bars (default). Volume Climax Down bars indicate a large supply that is pushing prices down. The default setting is the white color of the bars.

Volume 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 Volume 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 Volume Climax Down bar is tested.

Market lows are also indicated by Volume Climax Down bars, often with low volume 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 volume 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 Volume Climax Down bars. These show profit taking or traders calling a top too quickly. As soon as this Climax volume drops, the uptrend will likely resume. The continuation of the uptrend will be confirmed when the high of the Volume Climax Down bar is removed.


KVO High volume churn (Green Bars)

High volume churn bars are identified by dividing the volume by the high to low range of the bar and then looking for the highest value in the last 8 bars (default). High volume 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 volume histogram are colored green.

High volume churn bars are typically seen at:

• The end of the uptrends
  
• The end of the down trends and Mid-trend profit-taking.
  
• When volume 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 Volume Climax (up or down) and High Volume Churn bars coincide and these bars are magenta in color. Beware of intra-day charts. The high volume churn often occurs on the last bars of the trading day. This does not necessarily represent a possible turning point, but a high volume of day traders closing positions.


KVO Low Volume (Yellow Bar)

Low volume bars are identified by looking for the lowest volume in the last 8 bars (default). Low volume 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 volume 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 volume bars are important volume 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 Volume Churn + Climax (Fuchsia Bar)

This is a mixture of KVO High volume churn (Green Bars) and KVO Volume Climax up/ Peak Up (Red Bar) or KVO volume Climax Down/ Peak Down (White Bar).

KVO No Volume Signal (Cyan/Aqua Bar)
There is no volume featured signal produced by the indicator.


Remarks

This is a Level 4 invite-only and closed source indicator.
Redeem rule: constant 350 tradingview coins per month and 350X10 tradingview coins per year.

版本注释:

Improve slow volume line visual effect so that the color volume bar can be observed.