Klinger Oscillator: A Trader’s Guide to Volume Signals

Many traders are familiar with momentum oscillators like the MACD. However, the MACD only looks at price. The Klinger Oscillator is a more advanced technical indicator because it combines both price and volume into one signal.

This oscillator is designed to measure the long-term trend of “money flow.” It helps traders see if “smart money” (volume) supports the price trend. This guide explains how the Klinger Oscillator works, how to read its signals, and how traders use it to find potential price reversals.

1. What Is the Klinger Oscillator?

The Klinger Volume Oscillator (KVO) is a momentum indicator designed to combine both price and volume to identify the long-term trend direction while still being sensitive enough to react to short-term fluctuations.

Developed by Stephen Klinger, this technical analysis indicator measures the “Volume Force” or the strength of money flowing in and out of an asset. It does this by comparing two exponential moving averages (EMAs) of this force: a fast 34-period EMA and a slow 55-period EMA (Corporate Finance Institute, n.d.).

This creates a main oscillator line. A 13-period EMA of this oscillator is then typically added as a signal line. Traders watch for two main things:

1. Crossovers: When the Klinger line crosses its signal line.
2. Divergences: When the asset’s price makes a new high or low, but the Klinger Oscillator fails to do the same. This signals that the money flow does not support the price, warning of a potential reversal.

2. How the Klinger Oscillator Works

The Klinger Oscillator works by turning complex market data price and volume into a simple oscillator. It measures the “Volume Force” (sometimes called force volume), or the strength of money flowing in or out of a security or an asset.

2.1. Core Concept

The core concept is to measure “smart money.” Stephen Klinger believed that traders must look at Cumulative Volume Flow (CVF) to see if institutions are buying or selling.

• When the oscillator (measuring CVF) is rising, it confirms that the uptrend is strong and “smart money” is likely buying.
• When the oscillator is falling, it signals potential weakness and that “smart money” is selling.

2.2. Formula of the Klinger Oscillator

The Klinger Oscillator (KVO) line is created by subtracting a slow exponential moving averages (EMA) from a fast one of “Volume Force.”

To make this formula easy to understand, here is a simple breakdown of the parts:

• Volume Force (VF): The most important part. It is a complex calculation that looks at three things: price range (the high minus the low), the trend direction (up or down), and volume. This one number represents the strength and direction of the money flow based on these price movements.
• KVO Line: The fast line on the indicator. It shows the momentum of the money flow.
• Signal Line: A 13-period EMA of the KVO Line is then plotted. This is the slow line. Traders use the KVO line crossing this signal line to get buy or sell signals.

3. Interpreting the Klinger Oscillator Signals

The Klinger Oscillator generates trading signals in two main ways: through crossovers (with its signal line) and through divergences (with the price).

Here is a simple breakdown of the four most common signals:

Signal Type	Description	Trader Action
Bullish Crossover	The KVO line (the main, faster line) crosses ABOVE its 13-period signal line (the slower line).	Potential bullish signal (Buy) or a prompt to cover a short position.
Bearish Crossover	The KVO line (the main, faster line) crosses BELOW its 13-period signal line (the slower line).	Potential bearish signal (Sell) or a prompt to close a long position.
Bullish Divergence	The security’s price makes a new low, but the Klinger Oscillator makes a higher low.	A warning that selling pressure (volume) is weakening. Signals a potential bullish reversal.
Bearish Divergence	The security’s price makes a new high, but the Klinger Oscillator makes a lower high.	A warning that buying pressure (volume) is weakening. Signals a potential bearish reversal.

4. How to Use the Klinger Oscillator in Trading

Traders use the Klinger Oscillator for more than just its basic signals. It is a flexible tool for identifying trend strength, spotting reversals, and confirming breakouts.

4.1. Identifying Trend Strength

One of the Klinger’s main jobs is to determine if the “smart money” (volume) supports the current price trend.

Traders watch the oscillator’s position relative to its zero line (or centerline).

• If the KVO is above 0: The long-term money flow is positive (bullish). These zero-line crossovers are the first indication of a major trend shift.
• If the KVO is below 0: The long-term money flow is negative (bearish).

A strong, healthy trend exists when the KVO and the price move “in-sync.” For example, if the price is making new highs and the Klinger Oscillator is also rising and staying above its zero line, it confirms the uptrend is strong.

4.2. Spotting Divergences

This is the most popular way to use the Klinger Volume Oscillator. A divergence occurs when the price and the oscillator move in opposite directions, warning that the current trend is losing momentum and a reversal may be near.

• Bullish Divergence (A Buy Signal): The price makes a new low, but the Klinger makes a higher low. This signals that selling volume is drying up and the price may be ready to reverse upwards.
• Bearish Divergence (A Sell Signal): The price makes a new high, but the Klinger makes a lower high. This signals that buying volume is weakening and the price may be ready to reverse downwards.

This is a very common technique in swing trading and is a classic example of volume-based analysis.

4.3. Confirming Breakouts

Price breakouts on a chart can often be “false breakouts” (or fake-outs). The Klinger helps traders confirm if a breakout is real by checking if volume supports the move.

If a stock’s price breaks above a key resistance level, a trader will look for the Klinger Oscillator to confirm this. A strong confirmation signal is when the KVO also rises above the zero line (or centerline) and crosses its signal line, showing that long-term money flow has turned positive and supports the new price high.

5. Klinger Oscillator vs. Other Indicators

The Klinger Oscillator is often compared to other popular indicators, especially the MACD and On-Balance Volume (OBV). Understanding their key differences helps traders know what signal they are actually getting. This comparison also helps link these related concepts, improving topical authority.

Indicator	Primary Focus	Key Difference / Advantage
Klinger Oscillator (KVO)	Price + Volume Combined	Its main advantage is combining price trends and volume flow into a single, smoothed oscillator, providing nuanced signals less prone to false readings.
MACD	Price Momentum Only	An excellent and popular momentum indicator, but it does not use volume data in its calculation at all; it only measures the relationship between two price averages.
OBV	Volume Flow Only	A simple but effective indicator that tracks cumulative volume pressure. It does not use smoothing (like the Klinger) and does not directly measure price momentum.

6. Trading Strategies Using Klinger Oscillator

The Klinger is a flexible tool. Traders can use it in several different strategies, from confirming trends to spotting trading opportunities. Here are three common examples.

6.1. Strategy 1: Trend Confirmation

Trend confirmation is the most basic trading strategy. It uses the KVO’s zero line to determine the main trend and the signal line for the entry trigger.

• Buy Signal: A trader looks for a Buy Signal when the KVO line is above the 0 line (confirming a long-term uptrend) AND the KVO line crosses above its 13-period signal line.
• Sell Signal: A trader looks for a Sell Signal when the KVO line is below the 0 line (confirming a long-term downtrend) AND the KVO line crosses below its 13-period signal line.

6.2. Strategy 2: Divergence Reversal Setup

Divergence reversal setup is the most popular way to use the KVO. A trader will look for a divergence between the price and the KVO, often on a higher timeframe like the Daily (D1) or 4-Hour (H4) chart.

A divergence is only a warning sign, not a full signal. To confirm the trade, many traders will combine the KVO divergence with a signal from another technical analysis indicator, such as an RSI overbought/oversold signal or an MACD crossover.

6.3. Strategy 3: Combine with Moving Averages

This strategy blends a classic price-based trend indicator with the KVO’s volume confirmation.

1. Step 1 (Find Trend): A trader first uses a long-term Moving Average (MA), like the 50-day or 200-day MA, to identify the main, primary trend. (e.g., if the price is above the 200-day MA, they only look for buy signals).
2. Step 2 (Find Entry): Once the main trend is confirmed, the trader then uses the Klinger Oscillator to find a safe entry point. For example, in an uptrend, they will wait for the price to pull back (dip) and then enter only when the KVO shows a bullish crossover.

7. Strengths and Limitations of the Klinger Oscillator

Like any technical tool, the Klinger Oscillator is not perfect. It is important for traders to understand its advantages (why to use it) and its weaknesses (when to be careful).

7.1. Strengths (Pros)

The KVO’s unique calculation method provides several key advantages for macro and swing traders:

• Combines price and volume: Its biggest advantage is that it blends price momentum and volume flow. This provides a deeper, more confirmed signal than price-only indicators (like the MACD).
• Excellent for divergence: The Klinger is highly effective at spotting divergences. When price makes a new high but the oscillator makes a lower high, it’s a strong warning that buying pressure (volume) is fading.
• Good for swing trading: The indicator’s default settings (34 and 55) are slow. This makes it well-suited for swing traders and medium-term traders who want to catch the larger, multi-day or multi-week trends.

7.2. Limitations (Cons)

However, the Klinger Oscillator has constraints that limit its effectiveness in certain market environments:

• Noisy in sideways markets: Like most oscillators, the KVO can give false signals (noise) when the market is choppy or moving sideways. It works best in clear trending markets.
• Lagging indicator: Because it is based on Exponential Moving Averages (EMAs), it is a lagging indicator. The buy or sell signals will always appear after the price has already started to reverse.
• Not suitable for scalping: This financial tool is too slow for scalping or very high-speed day trading. The signals are not designed to catch tiny, rapid price moves.

8. Example of the Klinger Oscillator in Action

Here are two clear examples of how a trader might use the Klinger to analyze a specific security.

8.1. Bullish Example (Accumulation on Apple)

Imagine Apple (AAPL) stock has just gone through a correction and the price is now moving sideways in a flat, boring range for several weeks.

• While the price is flat, a trader notices the Klinger Volume Oscillator line is steadily rising and has crossed above its zero line.
• What it means: This is a classic sign of accumulation. It suggests that “smart money” (volume) is quietly buying the security during this quiet period. The rising KVO signals that underlying buying pressure is building, often before the price breaks out to the upside.

8.2. Bearish Example (Distribution on NVIDIA)

Imagine NVIDIA (NVDA) stock has been in a very strong, long uptrend and is pushing up to make a new all-time high.

• As the price makes this new high, the trader sees that the Klinger Oscillator line has made a lower high.
• What it means: This is a strong bearish divergence, which signals distribution. It means that even though the price is higher, the “smart money” (volume) is not supporting the move for this security; in fact, it may be selling. This is a powerful warning sign that the uptrend is exhausted and may be ready to reverse downwards.

9. Frequently asked questions about Klinger Oscillator

10. The Bottom Line

The Klinger Oscillator is a powerful tool, especially when it is combined with other momentum indicators or trend-following filters. It provides a unique insight by adding volume data to a momentum reading.

However, traders should avoid using it in isolation, as it can produce false signals in choppy markets. For optimal results, combine the KVO with price action analysis (like support and resistance) and basic volume confirmation.

To learn more about the best technical indicators and how to build a complete trading strategy, explore the many in-depth guides at PipRider.