The Klinger volume oscillator (KVO) was developed by Stephen Klinger who has been in the securities industry since 1985. The Klinger oscillator’s purpose is to predict price reversals by comparing volume to price.
The oscillator takes the difference of two moving averages or, in this case, exponential moving averages (EMA). Shorter moving averages, the lower amount of periods, show more recent price data. The longer moving averages, the higher amount of periods, shows price data further in the past.
Trend Direction
When the shorter-term EMA is a greater value than the longer-term EMA, this makes the oscillator above zero and signifies the price is in an uptrend. When the longer-term EMA is a greater value than the shorter-term EMA, this makes the oscillator below zero and signifies a price downtrend. (Click this link to access an economic calendar for your trading strategies)
The Klinger Oscillator | Indicator Series Click To TweetThis type of indication is a close relative to how the Moving Average Convergence Divergence (MACD) signifies trend and price direction.
Buy And Sell Trading Signals
There is an even shorter-term, 13-period EMA, called the signal line, which is added in addition to the other two EMAs.
When the signal line crosses the KVO indicator line, while the KVO is in the uptrend direction, this indicates a signal to buy.
When the signal line crosses the KVO indicator line, while the KVO is in the downtrend direction, this indicates a signal to sell.
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