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Detect Change in Trend EarlyThe NEW VolumeFlow OscillatorThe Volume Flow Oscillator, orVFO, is an advanced indicatorbased on the Volume Heat concept.It is formed by averaging bar-tobarprice differences and weightingthose differences by volume. Theresulting indicator is sensitiveto changes in volume, giving usan early indication of a potentialchange in trend.The charts to the right illustratehow VFO can be used to give us atrading advantage. In the markedzones, you can see the raw VFO(the blue line) is moving rapidlyaway from the smoothed VFO (thegreen line). When this occurs, anew trend is typically beginning.Small changeBig changeThe Volume Flow Oscillator indicates a potential change in trend when it suddenlymoves a large distance away from its moving average, compared to movement inthe price chart.A good example of this occurredon JPM in April. Note the largemove in VFO, as well as the relativeposition of VFO at the end of themove, compared to price. Theprice chart ended slightly abovethe values from early April (about$45.50), whereas the VFO chartwas easily 3 times lower than whereit was in early April. The marketproceeded to drop over 20%.If you closely examine the chartsin these examples, you can see theincrease in volume, but it would bevery easy to miss if you were notwatching VFO! That’s the value ofthe indicator. VFO was also used tocreate the Dual Volume Flow andVolume Flow Divergence Systemsdescribed on the next page.Another Volume Flow example showing sudden movement away from the movingaverage, indicating a large amount of volume in the direction of the move, at eachof the shaded zones. These events often occur ahead of strong rallies or declines.6