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Vertical Horizontal Filter (VHF) was created by Adam White to identify trending and ranging markets. VHF measures the level of trend activity, similar to ADX in the Directional Movement System. Trend indicators can then be employed in trending markets and momentum indicators in ranging markets.
Vary the number of periods in the Vertical Horizontal Filter to suit different time frames. White originally recommended 28 days but now prefers an 18-day window smoothed with a 6-day moving average.
The formula this uses is ,
n=28;
x=(HHV(CLOSE,N)-LLV(CLOSE,N))/SUM(Absolute(CLOSE-REF(CLOSE,1)),N);
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.