The Volume Weighted MA indicator for MetaTrader4 shares a lot of similarity to the simple moving average; nevertheless, the Volume Weighted MA places a lot more emphasis on the volume in a given period of time.
The general concept about the Volume Weighted MA indicator is that price is given more weight during heavy trading action.
We define a period as the time interval chosen by the individual trader (for instance 5, 15, 30). This implies that if you have a 21-period simple moving average (SMA) on your activity chart and also add to it a 21-period volume weighted moving average, you’ll discover that they somewhat stick to the same path.
Nevertheless, on a closer look, you’ll notice that the averages do not copy each other accurately. The reason why we have this divergence is largely due to emphasis that is placed on volume by the Volume_Weighted_MA indicator, while the simple moving average only factors the average of the closing price per period.
Price is said to be bullish when the candle opens and closes above the Volume Weighted MA indicator signal line. During a bullish trend the wider the gap/space between the indicator line and price bars/candle, the stronger the bullish trend.
Conversely, price is said to be bearish when price bars opens and close below the signal line of the Volume_Weighted_MA indicator. The wider the gap/space between the candles and the indicator line, the stronger the bearish trend.
The indicator can be used to spot emerging trends, pinpoint current ones and signal the exhaustion of a move.
MT4 Indicator Characteristics
Currency pairs: Any
Platform: Metatrader 4
Type: chart pattern indicator
Customization options: Variable (Period_MA, Price_MA), Colors, width & Style.
Time frames: 5-Minutes, 15-Minutes, 30-Minutes, 1-Hour, 4-Hours, 1-Day, 1-Week, 1-Month
Type: support/resistance, pattern, trend