Excerpt from article below:
"Fundamentally, the VPCI reveals the proportional imbalances between price trends and volume-adjusted price
trends. An uptrend with increasing is a market characterized by greed supported by the fuel needed to
grow. An uptrend without is complacent and reveals greed deprived of the fuel needed to sustain itself.
Investors without the influx of other investors ( ) will eventually lose interest and the uptrend should
A falling price trend reveals a market driven by fear. A falling price trend without reveals apathy, fear
without increasing energy. Unlike greed, fear is self-sustaining, and may endure for long time periods without
increasing fuel or energy. Adding energy to fear can be likened to adding fuel to a fire and is generally
until the VPCI reverses. In such cases, weak-minded investor's, overcome by fear, are becoming irrationally
fearful until the selling climax reaches a state of maximum homogeneity. At this point, ownership held by weak
investor’s has been purged, producing a type of heat death capitulation. These occurrences may be visualized by
the VPCI falling below the lower standard deviation of a of the VPCI, and then rising above the
lower band, and forming a 'V' bottom. "
Full article: http://www.mta.org/eweb/docs/2007DowAward.pdf
Nearly all parameters are configurable and exposed via "Options" page (enable/disable BB, enable/disable breach-markings, enable/disable MA, ...).Also check the source for enabling "histogram" (difference between VPCI and MA of VPCI).
Do note that the shortTerm/longTerm lengths need tuning for your instrument. The default 5/20 is not optimal, in my quick check.
// // @author LazyBear // // If you use this code in its orignal/modified form, do drop me a note. // study("Volume Price Confirmation Indicator [LazyBear]", shorttitle="VPCI_LB") shortTerm=input(5) longTerm=input(20) src=close vpc = vwma(src, longTerm) - sma(src, longTerm) vpr = vwma(src, shortTerm)/sma(src, shortTerm) vm = sma(volume, shortTerm)/sma(volume, longTerm) vpci = vpc*vpr*vm hline(0) plot(vpci, color=orange, linewidth=2) DrawMA = input(true, type=bool, title="Draw MA on VPCI?") lengthMA=input(8, "VPCI MA Length") s=sma(vpci, lengthMA) plot(DrawMA?s:na, color=teal) // Uncomment this line to enable histogram // plot(DrawMA?(vpci-s):na, color=blue, style=histogram) DrawBands = input(false, type=bool) HighlightBreaches = input(true, type=bool) length=input(20, title="BB Length") mult=input(2.5) bb_s = vpci basis = sma(bb_s, length) dev = (mult * stdev(bb_s, length)) upper = (basis + dev) lower = (basis - dev) plot(DrawBands?basis:na, color=gray, style=line) p1 = plot(DrawBands?upper:na, color=gray) p2 = plot(DrawBands?lower:na , color=gray) fill(p1, p2, blue) b_color = (bb_s > upper) ? red : (bb_s < lower) ? green : na offs_v = 0.3 breach_pos = (bb_s >= upper) ? (bb_s+offs_v) : (bb_s <= lower ? (bb_s - offs_v) : 0) Breached=(bb_s >= upper) or (bb_s <= lower) plot(HighlightBreaches and Breached ? breach_pos : na, style=cross, color=b_color,linewidth=3)