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- Developed by Adam White and published in August 1991 in Futures Magazine
- Used for determining whether a market is trending or congested, or about to change from one to the other
- Useful within a technical trading system to determine which indicators are best-calibrated to the current market. In other words, VHF can help you determine whether you should use rangebound or trend-following trading indicators.
The VHF value implies whether prices are trending.
- Higher VHF = a higher degree of trend; in such scenarios, the implication is to use trend-following indicators.
- Lower VHF = lower degree of trend (use trading-range-friendly indicators like RSI or Stochastics)
- Rising VHF = developing trend
- Falling VHF = congesting market
Signals of market shift: congestion often follows high VHF values (as price peaks), trending prices often occur following low VHF (as price bottoms out)
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