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Anti-Volume Stop LossFINALLY!
As everyone who tried to create, understand, or even find the Buff Pelz Dormeier Anti-volume stop-loss indicator knows that - it's not easy. Personally, I have partially, or perhaps completely figured out, the tips Buff had given in Investing with Volume Analysis book.
AVSL now is ready.
Please do some test and give me a feedback how it works in your trade strategy.
Anti-Volume stop loss - AVSL
from Investing with Volume Analysis book CHAPTER 20 • RISKY BUSINESS 253-256:
"It is important in any risk-management process to predetermine an objective decision point level (a stop loss) to exit, thereby protecting principal in case you are wrong. My objective sell point is determined by using a quantitative formula I refer to as Anti-Volume Stop Loss (AVSL). Having a quantitative, yet intelligent sell point eliminates the emotional struggles involved in deciding when to exit a position.
AVSL is a technical methodology that incorporates the concepts of support, volatility, and, most importantly, the inverse relationship between price and volume. The AVSL combines the concepts of the VPCI (Volume Price Confirmation Indicator) and John Bollinger’s Bollinger Bands to create a trailing stop loss.
AVSL = Lower Bollinger Band – (Price, Length, Standard Deviation)
Where:
Length = Round (3 + VPCI)
Price = Average (Lows × 1 / VPC × 1 / VPR, Length)
Standard Deviation = 2 × (VPCI × VM)
One of the most difficult decisions is determining what one’s maximum loss threshold should be. Some say 2 percent; others say 20 percent. I believe the more volatile a security, the looser the stop should be. A nonvolatile security, such as Coca-Cola, might move 7 percent a year, while a volatile security such as Google might move 7 percent in a day. If you use a 7 percent stop for Coca-Cola, it might take a year to be stopped out while the security underperforms.
However, if you use 7 percent for Google, you can be stopped out intraday, not allowing the investment an opportunity to develop. By using the lower Bollinger Band of the securities lows, the AVSL considers each individual security’s own volatility. Thus, a volatile security would be granted more room of the stocks low while a stable security would have a tighter leash (see Figure 20.7).
The next important step is employing the price-volume relationship into the calculation. Volume gauges the power behind price moves. In accounting for this, when a security is in an uptrend and has positive volume characteristics, it is given more room. However, if the security exhibits contracting volume characteristics, then the stop is tightened. In this way, if a negative news event affects an unhealthy security, the stop is tighter, thus preserving more of your profits.
However, if the negative news event affects a security whose price-volume relationship is healthy, the stop has been loosened, avoiding the temporary whipsaw of an otherwise strong position. In these ways, AVSL lets the market decide when to exit your position.
AVSL tailors each security for support, volatility, and the pricevolume relationship based on an investor’s time frame as calculated from the chart data. For example, my portfolio positions are continually re-evaluated with this AVSL methodology, which yields the possibility of raising the decision point threshold periodically based on the time frame of my investment objective. With my short-term Giddy-up portfolios, I use daily chart data and seek to raise my maximum loss stop on a daily basis.
My intermediate ETF and stock positions are calculated off of weekly data and then re-evaluated weekly. With my longer term stock portfolios, the decision point is calculated off data revised monthly. This analytical approach that uses measurable facts over emotion or gut instincts allows me to maintain my objectivity. Thus objectivity, not emotion, informs my investment decisions."
How look mine AVSL:
Price component = low × 1/VPC × 1/VPR : for VPC > 1 and VPC < -1 | low × 1 × 1/VPR : for 1 > VPC > 0 | low × -1 × 1/VPR : for 0 > VPC > -1
AVSL Price = sma((low × 1/VPC × 1/VPR) , length) / 100
length = round : for VPCI > 0 | round [ absolute ] : for VPCI < 0 | 3 : for VPCI=0
Standard Deviation = mult × VPCI × VM)
AVSL = sma(Actual low price - AWSL Price + Standard Deviation, 26)
It's hard to say is it the same as in Buff Pelz Dormeier book, but I encourage you to modify the script for better results. Indicator
VPCI MA cross [LM]Hello guys,
I would like to introduce you a script that combines two indicators: VPCI( volume price confirmation indicator) and donchian MAs
VPCI:
Fundamentally, the VPCI reveals the proportional imbalances between price trends and volume-adjusted price
trends. An uptrend with increasing volume is a market characterized by greed supported by the fuel needed to
grow. An uptrend without volume is complacent and reveals greed deprived of the fuel needed to sustain itself.
Investors without the influx of other investors ( volume ) will eventually lose interest and the uptrend should
eventually breakdown.
A falling price trend reveals a market driven by fear. A falling price trend without volume reveals apathy, fear
without increasing energy. Unlike greed, fear is self-sustaining, and may endure for long time periods without
increasing fuel or energy. Adding energy to fear can be likened to adding fuel to a fire and is generally bearish
until the VPCI reverses. In such cases, weak-minded investor's, overcome by fear, are becoming irrationally
fearful until the selling climax reaches a state of maximum homogeneity. At this point, ownership held by weak
investor’s has been purged, producing a type of heat death capitulation. These occurrences may be visualized by
the VPCI falling below the lower standard deviation of a Bollinger Band of the VPCI, and then rising above the
lower band, and forming a 'V' bottom.
I have used MA's on top of VPCI and looking for crosses. Percatage that is shown in label is calculation of difference between previous cross and current close price. So you know if you would be flipping what % you would gain or loose, all is rounded with precission of two
DONCHIAN
I took donchain calculation from ichimoku to calculate conversion line and base line(both are giving me information about whether it's trending or not and distance from the mean)
There are various sections in setting:
VPCI - setting of MA lengths(for smaller timeframes I recommend using bigger MA length)
DONCHAIN - setting length for conversion and base line
Any suggestions are welcome
Indicator
Volume Price Confirmation Indicator by 2tmThis script is based on Buff Pelz Dormeier’s article “Investing with Volume Analysus”
As you knows the Volume is the Only Indicator to prior Candles.
So, Lot's of CMT(Charted Market Technicians) invest the Volume Indicator and the Buff Dormeier's VPCI is very popular.
If you have interest let's prey to God Google then he'll be answered.
Anyway, The Basic Logic is this.
a. VPC=SUM(C*V,PERIOD)/SUM(V,PERIOD)-MA(C,PERIOD)
b. VPR= SUM(C*V,PERIOD)/SUM(V,PERIOD)/MA(C,PERIOD)
c. VM=AVG(V,PERIOD)/AVG(V,PERIOD*K)
d. VPCI=VPC*VPR*VM
Feel free to use my script. Indicator
