Using the Vertical Horizontal Filter to Identify Market Regimes
Summary
The Vertical Horizontal Filter (VHF), introduced by Adam White in 1991, is designed to assess whether prices are trending or moving sideways. The document presents it as a way to guide the choice between trend following and range oriented indicators.
It describes three readings: higher values suggest a stronger trend, a rising value may signal a developing trend, and a falling value may indicate emerging congestion. It also gives a contrarian interpretation: congestion may follow high readings, while trends may follow low readings. These readings are alternative heuristics, not a tested trading rule; the document supplies no calculation details, thresholds, performance evidence, or risk controls. It recommends pairing VHF with a trend indicator to check whether a trend is present, but does not name a specific indicator or explain how to combine signals.
Key ideas
- VHF is intended to distinguish trending markets from congestion.
- Higher VHF readings are interpreted as evidence of stronger trending conditions.
- A rising VHF may indicate a developing trend, while a falling VHF may indicate congestion.
- The document also proposes a contrarian reading in which trends may follow low VHF values.
- It recommends checking VHF alongside a trend indicator, without specifying a testing method.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.