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The Volume Accumulation Oscillator (VAO) is a trading indicator developed by Marc Chaikin, who has also developed the Chaikin Money Flow Indicator and Chaikin Oscillator technical indicators.
The Volume Accumulation Oscillator, which is also called Chaikin Volume Accumulation and sometimes Accumulation/Distribution Indicator, is used in technical analysis to identify strengths and weaknesses in a market. It is derived from the On Balance Volume -OBV- indicator.
As with many trading indicators, divergence between the VAO and the close price indicates that the security price may reverse (VAO indicator rising and security price falling indicates that the security price direction may reverse and begin to rise).
An increase in the value of the VAO indicates that the asset is being accumulated and that the upward price movement is associated to most of the volume. While a decrease in the VAO indicates that, the asset is being distributed and that the downward movement of this asset is associated to most of the volume.
As a price and volume based indicator, the VAO uses the close and volume time-series in its calculation. There are two different ways to calculate the VAO. The high and low values in the formula can be calculated by taking the high and low prices or by taking the highest close price and the lowest close price over a certain period. The current Chaikin's Volume Accumulation formula uses the second implementation and thus it requires one parameter, which is the period used to calculate the lowest and the highest close price. The default parameter used is the 25-bars period.
Here are some other trading indicators: Chaikin Money Flow Indicator is another Accumulation/Distribution indicator developed by Marc Chaikin. Chaikin Oscillator is used to monitor the money that is flowing into and out of the market. Klinger Volume Oscillator is used to confirm trends as well as trend shifts
Trading financial instruments, including foreign exchange on margin, carries a high level of risk and is not suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in financial instruments or foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.
