Volume Weighted Moving Average and Trend Interpretation
Summary
The document defines a volume weighted moving average (VWMA) as the sum of each period’s closing price multiplied by its volume, divided by total volume over the same lookback. It recommends comparing the VWMA with a simple moving average (SMA) calculated over an equal period, so their difference isolates the effect of volume weighting. The included implementation note describes calculating the weighted sum and volume total across the lookback.
The proposed interpretation is that a VWMA above the SMA can indicate relatively stronger volume on rising periods, while a VWMA below it can suggest stronger volume on falling periods. Because the calculation weights overall volume rather than distinguishing buying from selling, it does not reveal trade direction by itself. The text presents these comparisons as trend clues, but supplies no backtest, performance evidence, or risk rules; the signals should not be treated as validated forecasts.
Key ideas
- VWMA weights each closing price by its period volume and divides by total volume across the lookback.
- Comparing VWMA with an equal-period SMA highlights how volume weighting changes the average.
- A VWMA above the SMA is presented as a possible sign of stronger volume during rising periods.
- A VWMA below the SMA is presented as a possible sign of stronger volume during falling periods.
- VWMA measures volume strength without separating buying from selling, and the document gives no performance validation.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.