What is a Volume-Weighted Moving Average? ... Compared to indicators like the On-Balance Volume and Ease of Movement, this is a ...Thiswebsiteoritsthird-partytoolsusecookieswhicharenecessarytoitsfunctioningandrequiredtoimproveyourexperience.Byclickingtheconsentbutton,youagreetoallowthesitetouse,collectand/orstorecookies.Pleaseclicktheconsentbuttontoviewthiswebsite.IacceptDenycookiesGoBackYouarehere:Home/TradingArticles/Volume-WeightedMovingAverage(VWMA)–ASimpleVolumeToolVolumeanalysismightseemesotericandchallengingtomaster.Whilevolumeanalysishasgreatpotential,somevolumetradingindicators,withtheirmanyinputs,arehardtounderstand.ThisiswhytheVolume-WeightedMovingAverage(VWMA)isasuitablechoiceforanyonenewtovolumeanalysis.IfyouarefamiliarwiththeSimpleMovingAverage(SMA),you’realreadywell-poisedtopickuptheVWMAasatradingtool.WhatisaVolume-WeightedMovingAverage?ComparedtoindicatorsliketheOn-BalanceVolumeandEaseofMovement,thisisastraightforwardindicator.AnSMAisanaverageofthepastNclosingprices.Itgivesthesameweighttoeveryclosingprice.3-DaySMA=(C1+C2+C3)/3AVolume-WeightedMovingAverageisthesame,exceptthatitgivesadifferentweighttoeachclosingprice.Andthisweightdependsonthevolumeofthatperiod.Forinstance,theclosingpriceofadaywithhighvolumewillhaveagreaterweightonadailychart.3-DayVWMA=(C1*V1+C2*V2+C3*V3)/(V1+V2+V3)E.g.,ifthevolumeofday3(V3)ishigher,itsclosingprice(C3)willhaveamoresubstantialeffectonthecomputedvalue.Thechartbelowwillhelpyouappreciatetheimpactofvolumeweighting.Afteramarketrise,theclosingpricesremainedhighatthispoint.Buttheirvolumeswerefalling.Hence,theVWMAgavethesepointslessweight.However,theSMAdidnotadjustanyweights.Hence,althoughtheVWMAcontinuedrising,itdidnotincreaseasmuchastheSMA.ThisbehaviorledtotheSMAcrossingabovetheVWMA.Here,theVWMAcrossedabovetheSMA.Canyoufigureoutwhy?HowToUseTheVWMA?Nowweknowwhatgoesintothisvolumeindicatorandhowitbehaves.Next,let’sthinkabouthowtouseittoimproveourtradingdecisions.Amovingaverageisaversatiletool.Youcan:Useitsslopeasatrendfilter.Com