The Volume Accumulation Oscillator has been created by Mark Chaikin. It is a rather complicated formula represented as follows:
VAO = [Close price for a period n - (High price for a period n + Low price for a period n) / 2] * Volume for same period n
VAO = [Cn - (Hn + Ln) / 2] * Vn where n is the period.
What this indicator tries to do is to express the Close price for the period n as a percent of the High and Low of the same period and then weighted, or multiplied by the compounding Volume of the same period.
Right from the beginning, we can say that because volume is a value that often can be erratic, this indicator may suffer from the whimsical ups and downs of the multiplication by the Volume. Perhaps if Volume is smoothed out with a Moving Average may bring better results.
We tested this indicator with doing backtesting and what we found was that the indicator indeed is erratic, i.e. the curves created by n versus equity, were not smooth but jumped high/ low depending on n. Long periods of n, i.e. at n being from 30 to 100 poor results were produced.
Therefore, we cannot say that this indicator is a reliable indicator. Also we see no value to it as it behaves at low standard depending on other indicators. Even smoothing the results with moving averages did not produce any good results therefore, the conclusion can be said that the indicator is not of much value to the stock trader.
VAO = [Close price for a period n - (High price for a period n + Low price for a period n) / 2] * Volume for same period n
VAO = [Cn - (Hn + Ln) / 2] * Vn where n is the period.
What this indicator tries to do is to express the Close price for the period n as a percent of the High and Low of the same period and then weighted, or multiplied by the compounding Volume of the same period.
Right from the beginning, we can say that because volume is a value that often can be erratic, this indicator may suffer from the whimsical ups and downs of the multiplication by the Volume. Perhaps if Volume is smoothed out with a Moving Average may bring better results.
We tested this indicator with doing backtesting and what we found was that the indicator indeed is erratic, i.e. the curves created by n versus equity, were not smooth but jumped high/ low depending on n. Long periods of n, i.e. at n being from 30 to 100 poor results were produced.
Therefore, we cannot say that this indicator is a reliable indicator. Also we see no value to it as it behaves at low standard depending on other indicators. Even smoothing the results with moving averages did not produce any good results therefore, the conclusion can be said that the indicator is not of much value to the stock trader.
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