# Volume Weighted Moving Average (VWMA)

> VWMA is a moving average weighted by candle volume. Candles with higher trading volume have a greater impact on the indicator, making signals more reflective of real market activity.

**Volume Weighted Moving Average (VWMA)** is a moving average in which each closing price is weighted by the trading volume of its candle. This means that high-activity periods have a greater influence on the indicator's value than low-volume "quiet" candles.

## Trend Identification with VWMA

VWMA is used like other moving averages — by comparing it to the current closing price:

- **Price above the VWMA line** → buy signal (long).
- **Price below the VWMA line** → sell signal (short).

🔵 Thanks to volume weighting, VWMA more accurately reflects real market consensus: price moves backed by high trading interest shift the line more, while low-volume moves have little effect on its position.

## VWMA Price Crossover

When the current price crosses the VWMA line, it may signal a local trend change:

- **Crossover from above downward** → signal to open a short position.
- **Crossover from below upward** → signal to open a long position.

The key value of VWMA crossovers is signal quality: if the breakout is accompanied by high volume, the move simultaneously shifts the VWMA line and confirms the strength of the trend.

## Calculation Formula

VWMA is calculated as the volume-weighted mean of closing prices over the last `Length` candles, where trading volumes serve as weights:

> **VWMA = Σ(Close[i] × Volume[i]) / Σ(Volume[i])**

Where `Close[i]` is the closing price of candle i, `Volume[i]` is the trading volume of candle i, and the sum is taken over the last `Length` candles.

:::note[Note]
Unlike EMA and SMMA, VWMA does not use a recursive formula — each value is recalculated fresh over the `Length` candle window. The only parameter is the period `Length`.
:::

## Timeframes and Practical Use

- On **liquid pairs** with high trading volume, VWMA produces the most reliable signals — volume data is trustworthy there.
- On **illiquid pairs** or non-standard timeframes, volume data quality may be poor, reducing the accuracy of the indicator.

👉 VWMA works best in combination with momentum indicators (RSI, MACD) or volatility indicators (ATR). Use it as a signal quality filter, not as a standalone entry trigger.

## Use in Veles Bots (Flexible Indicators)

Available settings:

- **Period** — number of candles for calculation. Range: 2–500, default value: 20.
- **Interval** — candle timeframe.
- **Method** — calculation type. By bar close (on the selected interval only), or by minute (once per minute for any interval).
- **Shift** — shifts the requested indicator value back by the specified number of candles.

## Limitations

- VWMA is a **trend indicator**: it shows the direction of movement based on participant activity, but does not predict reversals.
- The indicator **depends on volume data quality**: on pairs with manipulated or unrepresentative volume, signals may be unreliable.
- For better accuracy, it is recommended to use VWMA **in combination with other indicators** (RSI, ATR, EMA) and support/resistance levels.
- In Veles bots, VWMA can be used as an entry or exit filter, combined with any other conditions.

## Summary

VWMA is a trend filter that accounts for real market activity when calculating the moving average. In Veles bots, it helps filter out entries on low-volume moves and build strategies based on market-participant-confirmed trends. Most effective on liquid pairs in combination with momentum indicators such as RSI or MACD.