Extra indicators
VWMA: Volume-Weighted Moving Average
A moving average that counts each candle's close in proportion to how much trading happened in it.
The idea in plain words
A price reached on heavy trading says more than one reached on a quiet candle. The VWMA lets the busy candles pull the average harder, so it hugs the prices where most of the business was done.
How it is calculated
Multiply every close of the last N candles by its volume, add them up and divide by the total volume of those candles. On CFDs and forex the volume is the tick count: how many price changes there were.
VWMA = Σ(close × volume) ÷ Σ(volume) over the last N candlesHow to use it
- Read it like any moving average: rising means an uptrend, the price above it means buyers are in control.
- Compare it with an SMA of the same period: VWMA above the SMA means the rises came on more volume than the falls.
Drawing conclusions
- When VWMA and SMA are nearly equal, volume was spread evenly.
- A big gap between them points to one-sided, heavy trading.
Example
GOLD on H1: the SMA(20) is at 2,410 and the VWMA(20) at 2,416. The higher VWMA shows that the busiest hours traded near the top of the range: buying pressure is behind the move.
Prices in examples are illustrative.
Watch out for
- Tick volume is a stand-in for real volume; it works well for comparisons within one ticker, less across tickers.
A little history
Volume-weighted averages grew out of the institutional VWAP benchmark; the moving version became a standard indicator in charting software in the 1990s.
Educational content only. No indicator or pattern predicts the future, and nothing here is investment advice.