Combining Volume-Weighted Price Deviation with MACD Timing States

Summary

This indicator combines a volume-weighted average price with MACD-style trend measures to classify market conditions. It calculates the average closing price weighted by volume over a rolling lookback, then plots the distance between the current close and that average as a histogram. It also compares two exponential averages and a smoothed signal line to identify momentum and direction.

The indicator assigns positive timing states when the volume-weighted average is rising and negative states when it is falling. The MACD and signal relationship further distinguishes momentum from correction or pause conditions. The accompanying interpretation treats some states as potential reversals and recommends waiting for renewed momentum before treating a pause as confirmation. The document provides formulas and code, but no performance tests or evidence that the signals predict profitable trades. It does not specify an instrument, transaction costs, or risk controls, so the classifications are best understood as a technical framework requiring independent validation.

Key ideas

• The Wave histogram measures the close’s distance from a recent volume-weighted average price.
• The MACD and its smoothed signal line help divide conditions into momentum, correction, and pause states.
• Rising or falling volume-weighted averages determine whether the timing states are positive or negative.
• Pause states can precede reversals, so the document advises waiting for momentum confirmation.
• The source supplies indicator logic but no performance evidence or risk-management rules.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.