Volatility Based Momentum Oscillator (VBMO)

There is a frequent and definitive pattern in price movement, whereby price will steadily drift lower, then accelerate before bottoming out. Similarly, price will often steadily rise, then accelerate into a climax top.

The Volatility Based Momentum Oscillator (VBMO) is designed to delineate between steady versus more accelerated and climactic price movements.

VBMO is calculated using a short-term moving average, the distance of price from this moving average, and the trading instrument’s historical volatility. Even though VBMO’s calculation is relatively simple, the resulting values can help traders identify, analyze and act upon many scenarios, such as climax tops, reversals, and capitulation. Moreover, since the units and scale for VBMO are always the same, the indicator can be used in a consistent manner across multiple timeframes and instruments.

For more details, there is an article further describing VBMO and its applicability.

Open-source script

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