The Velocity of Price Change (VP) indicator is a significant tool for forex traders. It provides a consistent average rate of price change at specific time intervals. The robust algorithm used in the VP indicator helps eliminate random price jumps, making the tool reliable for forex trading.
How VP Indicator Works in Forex Trading
The VP indicator functions by constructing a polyline from segments of different length regression lines. The beginning of each segment starts from the end of the previous one. Each regression segment continues until the variance or spread of price around it exceeds a predetermined critical value. At that point, the construction of that segment ends, and the building of the next segment begins. This method is effective because the price variance around the regression segment increases with large price jumps and increased volatility, which usually occurs when the trend movement changes. This feature enables the VP indicator to identify trend changes.
Adapting to Market Situation
The number of points used to plot each segment of the regression line is variable and depends on the market situation as described by the indicator. This number can range from Backstep to Depth, which are adjustable in the indicator settings. The smaller the Backstep, the less delay in identifying the start of a trend movement. Reducing the Depth allows a trader to identify areas with different average rates of price change on long trends.
Normalized Rate of Price Change
Once each regression segment is built, the total price increment at each segment is divided by its length and the threshold price variance. This division is the indicator’s reading, showing the normalized rate of price change. This feature is particularly useful in tracking trends and identifying the moments of their reversal, which often coincide with sharp changes in the indicator readings.
Indicator Settings
In the VP indicator settings, you can choose the type of price to apply. These include Close price, Open price, High price, Low price, Median price ((high low)/2, default), Typical price ((high low close)/3), and Weighted price ((high low 2″.
FAQs
How reliable is the VP indicator in forex trading?
The VP indicator uses a robust algorithm to smooth out price volatility and insignificant movements, making it a reliable forex tool in tracking trends and identifying moments of trend reversal.
How does the VP indicator adapt to market situations?
The VP indicator adjusts the number of points used to plot each regression line segment depending on the market situation. The range of points can vary from Backstep to Depth, enabling the indicator to adapt to different market conditions.
Can the VP indicator help identify trend changes?
Yes, the VP indicator is specifically designed to identify trend changes. It achieves this by observing the variance or spread of price around each regression segment. When this variance begins to exceed a certain critical value, usually associated with large price jumps and increased volatility, the indicator identifies this as a moment of trend change.
Interested users can watch independent testing of the VP indicator on the forexroboteasy.com website and even subscribe to updates on the results of testing this product. We welcome users to share their experience with this product. Remember, this is an independent product review and is intended to provide unbiased information about the VP indicator’s performance in forex trading.
Write review