VAcc Pro: Velocity and Acceleration
VAcc is an abbreviation for Velocity and Acceleration. It is an universal momentum indicator.
Overview
I initially introduced this indicator in the September 2023 edition of the <Technical Analysis of Stocks and Commodities> magazine http://traders.com/#Sep2023. It is to be available in most trading platforms and charting software.
Concepts
Price movements adhere to the principles of physics. While momentum indicators typically approximate velocity, and in the case of MACD histogram, also acceleration, VAcc directly incorporates these fundamental concepts. This unique approach makes VAcc a generic momentum indicator. Traders can employ their physics knowledge to interpret VAcc, as opposed to having to understand the unique features of each individual indicator.
My TASC article presented compelling comparisons with MACD and Stochastics. VAcc is notably more responsive, aligns more precisely with price peaks and troughs, identifies divergence more effectively, is more robust with parameter selection, and offers simplicity in interpretation.
Applications
VAcc displays velocity in a single line form and acceleration as histogram.
Over longer lookback periods, VAcc closely mirrors the behavior of MACD because of trendy portion in the price is more dominant over noises. Nevertheless, there are noteworthy distinctions between VAcc and MACD:
Display Format: VAcc employs a single-line display, in contrast to MACD's two-line approach. Consequently, VAcc lacks the concepts of the 'golden cross' and the 'death cross,' which are typically associated with MACD's dual-line configuration.
Golden Cross and Death Cross: In the context of VAcc, a traditional 'golden cross' manifests when the acceleration histogram crosses above the zero line, signifying a potential bullish signal. Conversely, a 'death cross' is indicated when the acceleration crosses below the zero line, suggesting a potential bearish signal.
With shorter lookback periods, VAcc exhibits characteristics akin to oscillators like Stochastic and RSI because volatility is more prevalent in short periods. As VAcc is unbounded, the Pro version of VAcc introduces an overbought/oversold band, complementing the standard velocity and acceleration readings.
VAcc band operates in a manner reminiscent of the overbought/oversold boundaries found in Stochastics and RSI indicators. However, what sets the VAcc band apart is its dynamic determination, as opposed to the static values employed by the latter two.
Calculations
Using m as filtering period, the average Velocity over n period is calculated as
VAv = ema({ (C - Cn) /n+ (C - Cn-1) /(n-1)+ …+ (C - Ci) /I+ …+ (C - C1) /1 } / n, m)
Similarly, the average acceleration over n periods is
Acc = {(v - vn) /n + (v - vn-1) /(n-1) + …+ (v - vi) /I +... + (v - v1) /1}/n
Note that the coefficient of each item in Vav and Acc series is:
1/n, 1/(n-1), …, 1/i, …, 1
They are essentially the weighs for each item, with the furthest carrying the least weigh 1/n, and the nearest unweighted. This natural weighing ensures the responsiveness of this indicator.
Parameter Settings
VAcc utilizes just two parameters: the lookback length and filter period. Depending on your trading style, consider the following settings:
1. Long-term traders may opt for 60 for the lookback length and 9 for the filter period.
2. Swing traders might find 34 and 5 to be suitable settings.
3. Short-term traders may prefer 21 for the lookback length and 3 for the filter period.
Overview
I initially introduced this indicator in the September 2023 edition of the <Technical Analysis of Stocks and Commodities> magazine http://traders.com/#Sep2023. It is to be available in most trading platforms and charting software.
Concepts
Price movements adhere to the principles of physics. While momentum indicators typically approximate velocity, and in the case of MACD histogram, also acceleration, VAcc directly incorporates these fundamental concepts. This unique approach makes VAcc a generic momentum indicator. Traders can employ their physics knowledge to interpret VAcc, as opposed to having to understand the unique features of each individual indicator.
My TASC article presented compelling comparisons with MACD and Stochastics. VAcc is notably more responsive, aligns more precisely with price peaks and troughs, identifies divergence more effectively, is more robust with parameter selection, and offers simplicity in interpretation.
Applications
VAcc displays velocity in a single line form and acceleration as histogram.
Over longer lookback periods, VAcc closely mirrors the behavior of MACD because of trendy portion in the price is more dominant over noises. Nevertheless, there are noteworthy distinctions between VAcc and MACD:
Display Format: VAcc employs a single-line display, in contrast to MACD's two-line approach. Consequently, VAcc lacks the concepts of the 'golden cross' and the 'death cross,' which are typically associated with MACD's dual-line configuration.
Golden Cross and Death Cross: In the context of VAcc, a traditional 'golden cross' manifests when the acceleration histogram crosses above the zero line, signifying a potential bullish signal. Conversely, a 'death cross' is indicated when the acceleration crosses below the zero line, suggesting a potential bearish signal.
With shorter lookback periods, VAcc exhibits characteristics akin to oscillators like Stochastic and RSI because volatility is more prevalent in short periods. As VAcc is unbounded, the Pro version of VAcc introduces an overbought/oversold band, complementing the standard velocity and acceleration readings.
VAcc band operates in a manner reminiscent of the overbought/oversold boundaries found in Stochastics and RSI indicators. However, what sets the VAcc band apart is its dynamic determination, as opposed to the static values employed by the latter two.
Calculations
Using m as filtering period, the average Velocity over n period is calculated as
VAv = ema({ (C - Cn) /n+ (C - Cn-1) /(n-1)+ …+ (C - Ci) /I+ …+ (C - C1) /1 } / n, m)
Similarly, the average acceleration over n periods is
Acc = {(v - vn) /n + (v - vn-1) /(n-1) + …+ (v - vi) /I +... + (v - v1) /1}/n
Note that the coefficient of each item in Vav and Acc series is:
1/n, 1/(n-1), …, 1/i, …, 1
They are essentially the weighs for each item, with the furthest carrying the least weigh 1/n, and the nearest unweighted. This natural weighing ensures the responsiveness of this indicator.
Parameter Settings
VAcc utilizes just two parameters: the lookback length and filter period. Depending on your trading style, consider the following settings:
1. Long-term traders may opt for 60 for the lookback length and 9 for the filter period.
2. Swing traders might find 34 and 5 to be suitable settings.
3. Short-term traders may prefer 21 for the lookback length and 3 for the filter period.