Vertical Horizontal Filter

The Vertical Horizontal Filter (VHF) is an indicator devised by Adam White in order to identify trends and congested phases of the market. The calculation involves the interaction of CLOSE, HIGH and LOW prices reached in a period of 28 periods; to be precise, the VHF arises from the ratio between the absolute value of the difference between HIGH and LOW recorded from the period under consideration, and the sum of the absolute values of the differences between consecutive CLOSE prices of the period considered.
The interpretative theory states that a decidedly higher VHF confirms the market trend, while a bearish VHF preludes the start of a congested phase. Furthermore, the tracing of new highs preludes a phase of congestion, while new lows confirm the hypothesis of exit from the congestion and the beginning of a tendential phase (be it bullish or bearish).