Combining VWMA, Bollinger Bands, and RSI for Market Signals

Summary

This script overlays a volume-weighted moving average (VWMA) on a simple moving average (SMA) Bollinger Band basis and describes how to interpret their relationship. Its accompanying explanation treats the VWMA’s position relative to the SMA, when price reaches an outer band, as a clue about whether price movement is accompanied by volume. It suggests possible continuation or correction scenarios from those combinations.

The code also defines RSI thresholds and Bollinger Band cross conditions, but the related strategy entry logic is commented out, so the published script does not actively execute those RSI and band entries as written. The explanation recommends using RSI and MACD as additional context and acknowledges that indicators can fail. No backtest results or evidence establish the proposed interpretations, and the document’s verbal account of VWMA behavior should be treated as a heuristic rather than a demonstrated rule.

Key ideas

• The script plots an SMA-based Bollinger Band channel and a VWMA calculated over the same lookback.
• The author interprets VWMA divergence from the SMA as a clue about price movement relative to volume.
• The described band and RSI entry conditions are commented out in the provided source.
• The author presents continuation and correction scenarios as interpretations, not as validated outcomes.
• The document advises checking other indicators and gives no backtest evidence for the method.

Tags

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