Volume Price Confirmation Indicator (VPCI)

Parameters: short_period = 5 (2–50) • long_period = 20 (10–200) • signal_period = 20 (5–50)

Overview

The Volume Price Confirmation Indicator (VPCI) provides a sophisticated approach to analyzing the relationship between price movements and trading volume. Unlike traditional volume indicators that simply measure volume levels, VPCI compares volume-weighted price trends with standard price trends to identify market conditions that may not be apparent from price action alone. This unique methodology helps traders distinguish between sustainable trends backed by volume and potentially false moves lacking volume support.

The indicator's calculation involves three key components: the Volume-Price Confirmation/Contradiction (VPC) which measures long-term divergences, the Volume-Price Ratio (VPR) capturing short-term dynamics, and the Volume Multiplier (VM) that adjusts for relative volume changes. The formula VPCI = VPC × VPR × VM creates an oscillator that effectively reveals whether price movements are supported by appropriate volume activity, making it invaluable for confirming trend strength and identifying potential reversals.

Interpretation & Trading Signals

Market Condition Analysis:

  • Rising Price + Rising VPCI: Greed supported by volume - strong bullish trend
  • Rising Price + Falling VPCI: Complacent greed without fuel - potential weakness
  • Falling Price + Rising VPCI: Fear with increasing energy - strong bearish trend
  • Falling Price + Falling VPCI: Apathy without energy - potential bottom

Trading Signals:

  • Zero Line Cross: VPCI crossing above zero suggests bullish momentum
  • Signal Line Cross: VPCI crossing above its MA indicates trending conditions
  • Divergence Patterns: Price/VPCI divergences warn of potential reversals
  • V-Bottom Formation: VPCI bouncing from extreme lows signals potential recovery

Advanced Applications:

  • Trend Confirmation: Use VPCI to validate breakouts and trend continuations
  • Parameter Optimization: Adjust short/long periods for specific instruments
  • Multi-Timeframe: Compare VPCI across timeframes for confluence
  • Bollinger Band Integration: Add bands to identify overbought/oversold zones

Example Usage

Code examples will be available once the Rust implementation is complete.

Performance Analysis

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