Vertical Horizontal Filter
Type
Trend follower
Short introduction
Adam White developed the Vertical Horizontal Filter (VHF) to measure the trend intensity, regardless of the direction of the trend.
Statement
To calculate the VHF, the current difference between the period high and period low is formed by the sum of this difference over the calculation period. The indicator thus always fluctuates between 0 and 1.
A value close to 0 means that there is no clear direction, i.e. you are in a trendless market. A value close to 1 indicates a very strong trend.
Formula/calculation
VHF=(Hn-Ln)/(Dt+Dt-1+Dt-2 + ... +Dt-n+1)
where:
D = price change compared to previous day
Interpretation
The VHF measures the strength of the trend. The VHF cannot say whether there is an upward or downward trend. An increasing VHF value therefore indicates an increasing trend strength, while a decreasing VHF indicates a decreasing trend.
The VHF gives a good indication of which type of indicator should be used. With a small VHF value you should prefer oscillators, with large values rather trend followers.
The VHF is an interesting alternative to the Directional Movement Indicator or the ADX, which also measure trend intensity.
Default setting
- 28 days
Basic trading systems
- None