Volume Oscillator (VO)


The Volume Oscillator (VO) works on the technical premise that it is not the actual level of volume, but the change in volume relative to the recent past that has more technical significance. The Volume Oscillator displays the difference between two moving averages of a security's volume expressed as a percentage.

Chart 1: Volume Oscillator (VO)

You can use the difference between two moving averages of volume to determine if the overall volume trend is increasing or decreasing. When the Volume Oscillator rises above zero, it signifies that the shorter-term volume moving average has risen above the longer- term volume moving average, and thus, that the short-term volume trend is higher (i.e., more volume) than the longer- term volume trend.

The Volume Oscillator can be used to confirm a support or resistance break. A support break on increasing volume indicates a stronger move than a support break on low volume. Similarly, a resistance break on expanding volume shows more buying intensity.

Chart 2: Volume Oscillator (VO)

Volume Oscillator = [(Shorter Period SMA of Volume – Longer Period SMA of Volume) / Longer Period SMA of Volume ] * 100

Technical analysis focuses on market action — specifically, volume and price. Technical analysis is only one approach to analyzing stocks. When considering which stocks to buy or sell, you should use the approach that you're most comfortable with. As with all your investments, you must make your own determination as to whether an investment in any particular security or securities is right for you based on your investment objectives, risk tolerance, and financial situation. Past performance is no guarantee of future results.