1. Overview
The Volume Zone oscillator is an indicator that analyzes buying and selling activity in relation to certain price zones. The main idea behind the VZO indicator is that volume precedes price. We took the original VZO indicator and improved it by adding clear buy/sell signals, alerts, and much nicer-looking visuals than the original version.
While the original VZO indicator uses 2 SMA's over volume, ours uses EMA's for a quicker response. It also normalizes the output to be between -100 and +100. This gives we it provides clear overbought and oversold area's which are perfect areas to look for trades. For example when we see the VZO being overbought and oversold and spot divergence between the VZO and price then that is a perfect opportunity to open a new trade
1.1 Trading strategy using the Volume Zone Oscillator & Divergence
One of the trading strategies is to wait for the VZO to dip into the green/red oversold/overbought zones. When the VZO is inside (or past) these zones, the next step would be to look for divergence between price & VZO. If that occurs a trade can be opened when the VZO leaves the overbought/oversold area
See the screenshot below for an example
2. Parameters
The indicator has several parameters you can choose to change to your liking
2.1 VZO Period
This is the normal period used for the Volume Zone Oscillator
2.2 ADX period & ADX Threshold
The indicator uses the ADX to determine if there is a trend or not. You can set the ADX period here and the threshold. When the ADX is above the threshold the market is trending. Buy/Sell Signals are only given in trending markets
2.3 EMA period
The indicator uses an EMA and generates signals when the price crosses above or below this EMA. You can specify the EMA period to use here.
3. Buy/Sell signals
The indicator will create buy/sell signals by placing arrows on the chart and on the VZO itself. It can also give alerts when a new buy/sell signal is created.
3.1 Buy signals
The rules for a buy signal are:
- ADX is above its threshold
- price crosses above the EMA
- VZO crosses above 40
3.2 Sell signals
The rules for a sell signal are:
- ADX is above its threshold
- prices crosses below the EMA
- VZO crosses below -40
4. Bloodhound/strategy support
The indicator exports a Signal plot which indicates when there is a buy/sell signal. You can use this plot in bloodhound, the strategy builder, or your own ninja script to build strategies
| Plot | Value | Description |
| Signal | 1 | Buy signal |
| -1 |
Sell signal | |
| Overbought | ||
| Oversold |
5. Alerts
The indicator can give an alert when a buy/sell signal occurs. You can specify which sound should be played and the alerts will also show up in the Alerts window of ninjatrader
6. Features
- Advanced volume zone oscillator
- Overbought/Oversold regions
- Buy/Sell signals
- Buy/Sell Alerts
- bloodhound/ninja script/strategy support
- Fully customizable
- Works on any timeframe
- Works on any market
- Works on any bar type
- Works with any NinjaTrader version
7. Changelog
11-dec-2022 v1.0.0.1
- Added overbought/sold bloodhound plots
22-Aug-2021 v1.0.0.0
- first release
9. Media
