VSO

VSO

This is similar to LazyBear's WaveTrend oscillator but handles momentum calculation differently and has some extra components for trade analysis.

The oscillator calculates an adaptive mean, then measures how far price deviates from that mean. Instead of just looking at raw deviation, it normalizes this by dividing by smoothed absolute deviation values.

The key difference is how it separates momentum - it splits the deviation into positive (up) and negative (down) components, then applies directional strength smoothing to each separately before combining them:

100 * (up_strength - down_strength) / (up_strength + down_strength)

This directional strength calculation gives more weight to sustained moves in either direction rather than just price volatility. The result is the main Momentum Wave oscillating between -100 and +100. The Signal Wave is just a smoothed version of this. The Momentum Gap shows the difference between them.

You'll see the Momentum Wave as a colored area/line with four color states, the Signal Wave as a white area, the Momentum Gap as a yellow line, the Drip Rate as cyan/purple area, and Velocity as a colored line at the bottom. The overbought/oversold zones are shaded, volatility bands adapt to current conditions, and major/minor signals show up as circles when the waves cross.

For trading, the Drip Rate is your long-term signal for bigger shifts. When it makes lower lows into resistance, look for reversals. Works great across multiple timeframes. Volatility squeezes signal big moves coming - use these with support/resistance and divergences. Top/bottom signals show momentum shifts and usually lead to pumps or drops.

Velocity shows breakout speed or rejections. Higher readings mean faster moves, regardless of direction. Wave colors reveal continuation patterns - green to purple to green means strong continuation up, red to cyan to red means continuation down.

The Momentum Gap can signal divergence on its own. The angle it crosses zero often hints at how fast the next move will be. When momentum goes outside the volatility bands, watch the next wave for divergence or confirmation.

Works best when you combine the Drip Rate across timeframes with squeeze setups and color changes for high-probability entries.

Works well with Heikin Ashi candles, or use the smoothed candle mode in the settings to mimic them. You can set the candle colors to the momentum wave colors as well, it can be helpful.

Here is a trade setup and how you can use it to take trades.