This indicator is based on the Klinger Volume Oscillator, or KVO. The KVO is pretty cool since it can track long-term changes in money flow (both into and out of a market), as well as respond and predict short term price fluctuations.
The Klinger Oscillator determines the direction (or trend) of money flow based on the high, low, and closing price of the security. It then compares all three values (HLC/3) to the previous period’s values to determine how volume should be factored into the KVO. If the current period’s price is greater than that of the previous period, then volume is added. It is subtracted, however, if the price is less than the previous period. This utilization of volume is what makes it an accurate tracker of money flow and a valuable confirmation indicator. This value is often called volume force or the “trend” line.
A fast and slow EMA of the volume force are then calculated. The fast EMA has a smaller window length, while the slow EMA has a larger window. Traders can adjust the lengths of each EMA in the input option menu, but we chose the standard 55 and 34 period lengths as the default settings. We are finally left with the actual KVO value after subtracting the slow EMA from the fast EMA.
The Klinger Oscillator uses a signal line similar to the MACD and many other indicators. The default length for it is 13, but that length can also be adjusted in the input menu. A shorter length will result in more responsiveness but possibly more false signals and whipsaws.
The Chart and Interpretation: The histogram shows the KVO series. Remember, since the Oscillator represents the difference between the fast and slow EMA, the KVO is bullish when it is greater than zero and bearish when it is less than zero.
When the KVO is greater than zero, the background on the chart is green, meaning that the trend is bullish and traders should look to go long. On the flip side, the background is red when the KVO is less than zero meaning traders should look to go short.
The aqua line plotted on top of the histogram is the signal line.
Here is a quick summary of the histogram colors:
(if KVO > 0 and KVO > signal) then (color = teal) if (KVO > 0 and KVO < signal) then (color = lime) if (KVO < 0 and KVO < signal) then (color = red) if (KVO < 0 and KVO > signal) then (color = pink)
Users can choose to have the candles change color to match the KVO histogram color by adjusting the setting in the input menu.
I think I may be in love with the Klinger Oscillator and I'm glad I found this spin on using it as an indicator. Very much into looking at formula's and looking at the reasoning behind what they are describing vs buy signal or sell signal. This is great at helping paint the picture, no pun intended, on where we are at with the KO, though you have to understand the KO to understand this spin and at first glance, I really like your concept.
Obviously, this shouldn't be used in isolation but combined with other markers, the KO seems to be king of the Oscillators. I'm probably dead wrong on that but it matches up with the way I use volume as an indicator for price movements. Bravo sir. I'll have to play around with this to see if this makes it easier to just see the KO without having to look down at the KO. Especially when I'm looking for the initial indication.
blindlytrading
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I'm looking at it on my chart now and comparing it to the KO. While this is useful the way it is designed, it could be better, if I'm looking at it right. Now, this might come from my misunderstanding of the Klinger Oscillator or from the difficulty in programming it to accurately represent the KO.
The Klinger Safety Zone, is causing a "confirmed," for lack of a better word, bull or bear trend if the if the spread is bull or bear AND the fast line is below the 0. However, from my undertanding of the KO, we do not consider it a confirmed bear or bull signal unless the break OCCURS under 0. So the initial Bull or Bear trend cannot be confirmed us true unless not only are the Fast and Slow in the right direction AND both under 0, but, the INITIAL switch from Fast over or under slow must occur on the correct side.
So when they both go under initially, this is NOT a signal that we are to be short or when they both go above initially this is NOT a reason to be long.
This signal definitely has it's usecase, however, if I'm not completely off my fucking rocker and spewing out shit that all made us just a little bit dumber and more likely to lose money, then this signal may be unintentionally hindering the process of making the right decision. However, if someone goes into it understanding it's flaws and (insert word for opposite of flaw that I can't think of), then this tool is likely quite useful.
I'm most likely just a moron though. Have a nice day. :)
blindlytrading
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I'm talking to myself in the comments but it looks like the blue line is the slow line that you have plotted. As long as someone knows that it's position is the pretext for whether or not we are under the right conditions for "confirmed bear" or "confirmed bull" signals to add to your arsenal then it's likely going to be more useful. Again, I don't think it reads the initial break on here and this shouldn't be used in isolation either.
It may be more useful to not get caught up in the initial clutter of figuring out when the KO is to be used anyway. Unless we are glued to our screens, have alerts, or are using bots, the "perfect" moment is likely going to be hard to take advantage of if that's what someone is using it for.
Anyway, this is just one tool in the bag for confirmation the "perfect" confirmation may be overlooking all the other use cases of the Klinger Oscillator that this KSZ indicator you've drawn up is capable of. Again, I love the spin, the histogram, and everything.
Cheers.
blindlytrading
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Talking to myself here, I love this indicator. Many use cases. The more I look at it each day, the better it gets. Bravo sir.
everget
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Hi, where did you get such KVO implementation? Do you have any link/reference to it?
elhotel1
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@everget, you two make the best indicator, great to see you good minds working together on these ideas and concepts !
Obviously, this shouldn't be used in isolation but combined with other markers, the KO seems to be king of the Oscillators. I'm probably dead wrong on that but it matches up with the way I use volume as an indicator for price movements. Bravo sir. I'll have to play around with this to see if this makes it easier to just see the KO without having to look down at the KO. Especially when I'm looking for the initial indication.