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2011issue C0562-70

Constructing a volume zone oscillator with a moving-average and Average Directional Index regime filter

The featured construction pairs a volume zone oscillator with a 60-bar exponential moving average of the close and a 14-bar Average Directional Index. Moving-average location and the Average Directional Index level label trending versus nontrending conditions first, so the same oscillator can be read in both trending and oscillating markets.

  • Combine a volume zone oscillator with a 60-bar exponential moving average of the close and a 14-bar Average Directional Index so the same oscillator can be read in trending and oscillating conditions.
  • Treat moving-average location and an Average Directional Index reading of 18 as a regime filter: above 18 is trending, below 18 is nontrending, and oscillator rules fire only after that label is set.
  • Read oscillator persistence between -40 and zero as selling pressure exceeding buying pressure, and persistence between zero and +40 as the first wave of an advance.
  • Keep the oscillator lookback configurable from the chart, and treat overbought, oversold, and zero-line crossings as explicit, alertable conditions.
Entries in this reading3 entries
Current trackAverage Directional Index71 readingsVolume-price analysis129 readingsMoving average449 readings

A single oscillator for two market conditions

The featured construction combines a volume zone oscillator with a 60-bar exponential moving average of the close and a 14-bar Average Directional Index so the same oscillator can be read in both trending and oscillating conditions. Volume-price analysis here is the oscillator reading. The moving average and the Average Directional Index supply the regime label that sits in front of that reading.

How the regime filter is labelled

In the published TradeStation implementation, an Average Directional Index reading above 18 is treated as trending and a reading below 18 is treated as nontrending. Price location relative to the 60-bar exponential moving average of the close is the other half of the regime filter. Oscillator rules fire only after that trending or nontrending label is in place.

How the oscillator classifies pressure

The same construction treats oscillator persistence between -40 and zero as selling pressure exceeding buying pressure, and persistence between zero and +40 as the first wave of an advance. The indicator implementation includes alerts when the oscillator crosses user-set overbought and oversold levels.

Volume zone oscillator on the Dow, January–March 2011

As the Dow advances from the mid-11600s toward 12400, the volume zone oscillator climbs from the zero line into the plus-40 buying-pressure zone, then loses that bid and crosses back through zero while the index peaks in mid-February and sells off into mid-March. The series was read from the VolumeZoneOsc pane of the eSignal screenshot, whose vertical scale is printed at 50 and 0.
As the Dow advances from the mid-11600s toward 12400, the volume zone oscillator climbs from the zero line into the plus-40 buying-pressure zone, then loses that bid and crosses back through zero while the index peaks in mid-February and sells off into mid-March. The series was read from the VolumeZoneOsc pane of the eSignal screenshot, whose vertical scale is printed at 50 and 0.Dow Jones Industrial Average · Daily bars · 2011-01-03T00:00:00.000Z to 2011-03-14T00:00:00.000Z

The pane does not print a lower-scale number. Points sit on the dated ticks and are rounded to the nearest 5 oscillator units; treat them as approximate.

A bullish sequence under the regime filter

A Bloomberg example marks a bullish setup when the oscillator crosses above zero on the last full bar below a 60-day exponential moving average, with the Average Directional Index near 18. Later in that sequence the oscillator recrosses above +15 as price gaps above that average and the Average Directional Index approaches 20.

Lookback as an explicit construction parameter

The eSignal formula exposes a single configurable lookback so the oscillator period can be changed from the chart editor. AmiBroker users can insert a ready formula and change the oscillator averaging period from the chart, showing the lookback as an explicit construction parameter rather than a fixed constant.

Regime-dependent rules in a later port

A Wealth-Lab port implements not only the oscillator but also regime-dependent system rules, including positive and negative price-oscillator divergences. Those divergences can be drawn as lines or as a binary wave for mechanical use.

Educational research material, not investment advice. Historical source context does not establish present-day performance.
39 of 56 in the Average Directional Index track
201117-24 pp.Next on Average Directional IndexA volume zone oscillator conditioned by an Average Directional Index filterThe volume zone oscillator is a scaled ratio of smoothed signed volume to smoothed unsigned volume and is read against fixed zones from -100 to +100.
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  6. 1988Average directional index construction: recursive smoothing and lookback offset
  7. 1988Staged Average Directional Index construction with Relative Strength Index confirmation and stop alerts
  8. 1988Average Directional Index construction with frozen true range and directional rules
  9. 1991Constructing the average directional index from range expansion and true range
  10. 1991Constructing five-session forecasts from stochastic, ADX, and MACD inputs
  11. 1993Constructing the average directional index from directional movement and true range
  12. 1993Confirming n-bar breakouts with ADX and DX filters
  13. 1994Constructing a Bollinger band-width trend filter
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  16. 1998Regime filters for mutated indicators
  17. 1999Building the average directional index from range extension and true range
  18. 2000Evaluating ADX, RSI, and moving averages in a multi-stock warehouse
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  20. 2000Onset and exit from one average directional index
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  34. 2008Average directional index and directional trend indicator lookbacks as trend-filter parameters
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  36. 2008A nine-cell directional scoreboard for multi-horizon entries
  37. 2010Building a Vortex Indicator from high-low distances
  38. 2010Constructing ADX, RSI, and MACD price filters
  39. 2011Constructing a volume zone oscillator with a moving-average and Average Directional Index regime filter
  40. 2011A volume zone oscillator conditioned by an Average Directional Index filter
  41. 2011Candlestick names need volume-price, ADX, and moving-average checks
  42. 2012Clustered average-directional-index traces as a trend-start filter
  43. 2012Average Directional Index cluster filters for trend-start signals
  44. 2012Confirming a trend start or turn with a triple ADX cluster
  45. 2013Constructing a late-entry stack from a signed DMI oscillator
  46. 2013A directional oscillator and its stochastic as a stacked timing filter
  47. 2013ADX cluster lookbacks are a locked specification, not a chart label
  48. 2013Combining moving averages, stochastics, and ADX in a daily scan
  49. 2015Assembling the Average Directional Index from directional movement
  50. 2016How an Average Directional Index filter and a breakout entry form one procedure
  51. 2016Score RSI and stochastic crossings only when ADX confirms the trend
  52. 2018Constructing an ADX filter for intraday breakouts
  53. 2018An ADX volatility gate for prior-day breakouts
  54. 2019Exponential deviation bands with a moving average, RSI and ADX
  55. 2020A normalized-slope trend filter from linear regression
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