Introduction to the Volume Weighted Moving Average Indicator
Table of Contents
Volume is a very important factor when considering the momentum of a price movement. However, most moving average lines treat price movements the same regardless of whether that price movement has volume behind or not. The Volume Weighted Moving Average Indicator simply adds volume within its formula to represent average price movements more effectively.
What is the Volume Weighted Moving Average Indicator?
The Volume Weighted Moving Average Indicator is a moving average type of indicator which incorporates volume within its computation of the moving average. This creates a moving average line which puts more relevance in price movements with significant volume and places less weight on price movements with no volume behind it.
How the Volume Weighted Moving Average Indicator Works?
The Volume Weighted Moving Average Indicator has a simple formula within its program script. It simply multiplies price with volume at multiple points on the price chart, then sums up the product of each price point. It then divides the result by the sum of the volume. The result would then be a point on the moving average line.
Ideally, the indicator should use the Real Volume rather than the Tick Volume as this represents the volume behind a trade. However, not all brokers provide this feed. As such, this indicator still allows users the option to use Tick Volume rather the Real Volume.
How to use the Volume Weighted Moving Average Indicator for MT5
Although this indicator has its options within its settings labeled in foreign language, the first three which are the most important fields are easily identifiable.
The first field would be the “Period” which allows users to modify the number of periods used on the formula.
The second filed would be the “Applied Price” which refers to the price source used in the formula. This could be the Open, High, Low, Close, Typical Price, Median Price, Weighted Price, and more.
The third field allows users to choose between the Real Volume and the Tick Volume.
The Volume Weighted Moving Average can be used just as most moving average lines are used.
It can be used to determine trend direction based on where price action generally is in relation to it as well as its slope.
It can also be used as a component of a moving average crossover.
Lastly, it can also be used as a dynamic support or resistance where price can reverse from.
Buy Trade Setup
When to Enter?
Identify an uptrend market. Wait for price to retrace towards the Volume Weighted Moving Average line. Open a buy order as price action forms a bullish reversal pattern on the line. Set the stop loss below the pattern.
When to Exit?
Close the trade as price action shows signs of a bearish reversal.
Sell Trade Setup
When to Enter?
Identify a downtrend market. Wait for price to retrace towards the Volume Weighted Moving Average line. Open a sell order as price action forms a bearish reversal pattern on the line. Set the stop loss above the pattern.
When to Exit?
Close the trade as price action shows signs of a bullish reversal.
Conclusion
The Volume Weighted Moving Average is one of the few technical indicators wherein most traders would easily see value when added to their trading strategies. Seasoned traders use this indicator for good reasons. However, it is best used with brokers that provide Real Volume.
MT5 Indicators – Download Instructions
Volume Weighted Moving Average Indicator for MT5 is a Metatrader 5 (MT5) indicator and the essence of this technical indicator is to transform the accumulated history data.
Volume Weighted Moving Average Indicator for MT5 provides for an opportunity to detect various peculiarities and patterns in price dynamics which are invisible to the naked eye.
Based on this information, traders can assume further price movement and adjust their strategy accordingly. Click here for MT5 Strategies
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How to install Volume Weighted Moving Average Indicator for MT5.mq5 to your MetaTrader 5 Chart?
- Download Volume Weighted Moving Average Indicator for MT5.mq5
- Copy Volume Weighted Moving Average Indicator for MT5.mq5 to your Metatrader 5 Directory / experts / indicators /
- Start or restart your Metatrader 5 Client
- Select Chart and Timeframe where you want to test your mt5 indicator
- Search “Custom Indicators” in your Navigator mostly left in your Metatrader 5 Client
- Right click on Volume Weighted Moving Average Indicator for MT5.mq5
- Attach to a chart
- Modify settings or press ok
- Indicator Volume Weighted Moving Average Indicator for MT5.mq4 is available on your Chart
How to remove Volume Weighted Moving Average Indicator for MT5.mq5 from your Metatrader 5 Chart?
- Select the Chart where is the Indicator running in your Metatrader 5 Client
- Right click into the Chart
- “Indicators list”
- Select the Indicator and delete
Volume Weighted Moving Average Indicator for MT5 (Free Download)
Click here below to download:
