Volume Weighted Average Price (VWAP) & Volume Weighted Moving Average (VWMA)

by | Sep 6, 2020

Disclaimer: Posts on the HyperTrader blog and associated HyperLinq websites are for educational and informational purposes only. These posts should not be taken as financial advice, nor are they meant to be viewed as trading advice. HyperLinq Inc. or the authors take no responsibility for any damages or losses.

When trading in the crypto market, it is imperative to identify a market trend. For crypto traders, closing out of a trade is more complicated than entering a trade position. Traders and analysts believe that crypto prices will generally follow short, intermediate, and extended-term directions, which have happened regularly based on historical trends. To help predict these market trends, several trading tools are available for traders. This blog will discuss two such technical indicators, Volume Weighted Average Price (VWAP) & Volume Weighted Moving Average (VWMA) Indicator, which will help crypto traders make better trading decisions in trading markets like BTC & ETH.

VWAP

Volume weighted average price (VWAP) is a weighted average that includes trade volume in its calculations. VWAP is plotted directly on a price chart. VWAP is solely a day trading tool; it will not be portrayed daily or more extensive periods like weekly or monthly. 

If the crypto asset price is floating below the VWAP, this may symbolize that the crypto asset is cheap on an intraday period. On the contrary, if the crypto asset price is higher than VWAP, it may indicate that the crypto asset is expensive on an intraday period.

VWAP can also be used as a gauge for trade fills. Volume is an essential element associated with the liquidity of the crypto market. For instance, if a crypto trader has its long trade filled over the VWAP line, this can be deemed an inadequate trade fill for the trader. A moving VWAP is a course following indicator and operates similar to a MA or MA substitutes, such as moving linear regression. For traders who apply trend following as the foundation of their trading tactics, moving VWAP can be a helpful indicator. For instance, price reversal traders can also use the moving VWAP. With certain conditions in the market, it’s suggested that crypto traders use a crossover strategy. The fundamental concept in crossover trading strategies is to use a secure average to assess course direction when it passes over a slow average.

VWMA

Volume Weighted Average Price (VWAP) & Volume Weighted Moving Average (VWMA)
VWAP & VWMA Indicator on HyperTrader

The Volume-weighted Moving Average (VWMA) highlights volume by measuring prices based on trading in a provided point of time. Traders can establish the time, the origin, and an offset. Crypto asset prices with massive trading action gain more pressure than asset prices with minimal trading action. In times of low market trade volume, the SMA and the VWMA are resembling in value. VWMA indicator can be applied to recognize and trade courses. The VWMA is frequently utilized in a mixture with other trading signals and analysis methods.

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Head of Content Marketing @ HyperLinq. His love for Chai and mountains precedes everything. Often wonders about things like, "why $1 earned through leverage feels 100x better than $1 earned selling your time?"
Head of Content Marketing @ HyperLinq. His love for Chai and mountains precedes everything. Often wonders about things like, "why $1 earned through leverage feels 100x better than $1 earned selling your time?"

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