Volume-Adjusted Weighted Moving Average (VAWMA)

Summary

VAWMA combines volume weighting with a linearly increasing weight for more recent bars. It calculates an average of the selected price series, multiplying each bar’s volume by a triangular weight that gives older bars less influence. The example uses median price and a lookback length of 50 bars. The weighted prices are divided by the sum of the weighted volumes to produce the indicator value.

The stated motivation is to reduce abrupt shifts that can occur in a volume-weighted moving average when an unusually high-volume bar near the start of the lookback window later drops out. Triangular weighting tapers that bar’s contribution over time. The document provides an indicator description and an implementation example, but no charts, market tests, or performance evidence. VAWMA remains a lagging average, and its behavior depends on the chosen input price, window length, and volume data; the document does not establish that it improves trading results.

Key ideas

• VAWMA weights prices by both trading volume and recency.
• Triangular weights reduce the influence of older bars in the lookback window.
• The example calculates the average from median price and volume.
• The proposed benefit is to lessen abrupt changes when an early high-volume bar leaves the window.
• The document gives no empirical evidence that the indicator improves performance.

Tags

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