Vertical Horizontal Filter
A little explanation about
VHF [ Vertical Horizontal Filter ] - it will make the an indicator's Signal more accurate.
The Vertical Horizontal Filter (VHF), developed by Adam White, is designed on it's own to detect whether a market is trending or ranging. It assesses the degree of "trend activity", akin to the ADX in the Directional Movement System.
The VHF is used as a guide for analysts to decide on taking signals off their trend trading indicator (eg. MACD) or an indicator that's fit for ranging markets (eg. RSI).
In trending markets, trend indicators like the MACD can be utilized, while momentum indicators like the RSI are applicable in ranging markets. The role of the Vertical Horizontal Filter is to indicate which indicator should be used.
Vertical Horizontal Filter [VHF] does not, itself, generate trading signals, but determines whether signals are taken from trend or momentum indicators.
- Rising values indicate a Trend.
- Falling values indicate a ranging market.
- High values precede the end of a trend.
- Low values precede a trend start.
Example
- Vertical Horizontal Filter rises, signaling the start of an up-trend;
- VHF falls, indicating that the trend is near its' end;
- VHF rises, signaling the start of a sharp down-trend;
Falling VHF signals the end of the down-trend.