Velocity Acceleration Convergence Divergence Indicator

The Velocity Acceleration Convergence Divergence Indicator tool is a momentum-based oscillator designed to identify trend strength and direction by calculating the difference between a security's velocity and its acceleration. This approach provides a more responsive alternative to traditional MACD oscillators, helping traders capture trend shifts with reduced lag.

Usage

The indicator is displayed as a histogram oscillating around a zero midline. Traders can interpret the signals as follows:

• Bullish Trend: When the histogram crosses above the zero midline, it indicates a bullish bias. A dark green bar signifies a strong bullish signal (increasing momentum), while a light green bar suggests a weakening bullish trend.
• Bearish Trend: When the histogram crosses below the zero midline, it indicates a bearish bias. A dark red bar signifies a strong bearish signal (increasing downward momentum), while a light red bar suggests a weakening bearish trend.
• Bar Coloring: The script includes an optional feature to color the price bars on the chart to match the histogram's signals, providing a visual confirmation of the current trend state.

Details

The Velocity Acceleration Convergence Divergence (VACD) is constructed by taking the difference between a smoothed Velocity Indicator and a Velocity Acceleration calculation.

1. Velocity: Calculated as the average rate of change over a specific length, where more recent changes are weighted more heavily by dividing the difference by the lookback index.
2. Acceleration: Calculated by applying the velocity logic to the already smoothed velocity values.
3. Divergence: The final VACD value is the subtraction of the Acceleration from the Velocity, highlighting the "lead" or "lag" in momentum movements.

Settings

General Settings

• Source: Determines the input data used for calculations (e.g., HLCC4, Close, Open).
• Resolution: Allows the indicator to be calculated based on a different timeframe than the current chart.
• Length: The lookback period used for both velocity and acceleration calculations.
• Smoothing Length: The period used for the Weighted Moving Average (WMA) applied to the initial velocity.
• Allow Repainting?: Toggle to determine if the indicator should use real-time data which might change after the bar closes.
• Allow Bar Color Change?: Enables or disables the coloring of chart bars based on the indicator's signal state.

FAQ

How do I use the strong vs. weak signals?

Strong signals (darker colors) occur when the VACD is moving further away from the zero line compared to the previous bar, indicating accelerating momentum. Weak signals (lighter colors) occur when the VACD begins to move back toward the zero line, suggesting a potential exhaustion or consolidation.

Can I set alerts for crossovers?

Yes, the script includes built-in alert conditions for strong buy/sell signals (crossing into accelerating momentum) and standard buy/sell signals (crossing the zero midline).

How can I access the Velocity Acceleration Convergence Divergence Indicator?

You can get access on the LuxAlgo Library for charting platforms like TradingView, MetaTrader (MT4/MT5), and NinjaTrader for free.