Colby (in his book The Encyclopedia of Technical Market Indicators, 2nd. ed., McGraw-Hill, 2003, pg. 774) notes that “As with simple momentum indicators generally, when the n-period exponential moving average of V*PMO is positive, momentum is bullish, so we buy, entering or initiating a long position.”
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First, calculate today’s V*PMO input value:
VTODAY * (CPTODAY – CPTODAY-1)
where
VTODAY = today’s volume
CPTODAY = today’s closing price
CPTODAY-1 = yesterday’s closing price
Then smooth the values using a 3-day exponential moving average (EMA):
V*PMO = EMA(3)(VTODAY,VTODAY-1,VTODAY-2)
The indicator was revised and updated