A volume oscillator that signs each day's volume by the direction of the close, then expresses it as a ratio to total volume. The ±40 and ±5 zones grade buying and selling pressure.
The VZO (Volume Zone Oscillator) was published in 2009 by the Egyptian analyst Walid Khalil, co-authored with David Steckler, as a volume-based oscillator.
Its starting idea is close to that of OBV. On days when price closes higher than the previous close, the volume is treated as positive; on days when it closes lower, it is treated as negative. Up to this point the logic mirrors OBV.
But VZO does not simply accumulate that signed volume. It takes the EMA of signed volume and divides it by the EMA of total volume. This extracts the share of total volume that flowed in the up direction, and converts it into an oscillator bounded roughly between −60 and +60.
Where OBV draws the running total of demand as a single line, VZO answers a more direct question. Is the volume currently flowing into the market tilted toward buying or toward selling? It reports the degree of that tilt on a scale that oscillates around zero.
How to Read
NASDAQ:AAPL
Members Only
Full access is reserved for members of the library.