VWAP (Volume Weighted Average Price)

VWAP (Volume Weighted Average Price) for MT4 INDICATOR

What is volume weighted average price MT4 INDICATOR? And how it works? are main questions that come in mind of an investor. In this article I will explain all the answers. 

Volume Weighted Average Price (VWAP) for MT4 INDICATOR

VWAP or volume weighted average gives traders plenty of knowledge of the average price in the market that traders are ready to pay for a security within a trade time duration. VWAP is more advanced a technical indicator that work on ratio between total value traded over total volume traded. VWAP is useful it indicates closing value of security and best for day trading.

Volume weighted average price (VWAP) is an indicator which identifies the average price of a security and stock at a specific timeframe. It depends on size of transaction that takes place. The VWAP is indicator that predict average price of security for investment.

Formula of VWAP indicator:

VWAP=∑Price * Volume /∑Volume

Where Price is typical price (average of the High, Low and Close) and V is Volume

Features of VWAP indicator.

  • Platform are: Meta Trader 4
  • Use charted graph for presentation and use different colour lines.
  • Time frame: short term few minutes, few hours and day trading for any security

Advantage of VWAP indicator:

Due to diverse nature of price in trading it was difficult to analyses accurate volume of transaction. VWAP are help to predict volume and future of stock. It represents the closing price of stock in better way than other indicators (MA) and identify liquidity price.

The VWAP point average price at weighted volume and work same for stock and securities on MT4 trading plat form. It allows to trade on MT5 that trade for future. The VWAP is often used with trading a large number of trades during a given session. The VWAP is primarily suited for the day traders. It gives idea about large markets and range. VWAP work on most logical, algorithm, systematic trades. A trading algorithm can also mechanically break the large portions of trade into smaller spots. It minimizes the risk because VWAP is a technical indicator.

 Disadvantage of VWAP Indicator:

Most important disadvantage is that it does not accurately predict true value of currencies. The VWAP is used in short time frames and does require a lot of practice. VWAP does not generate buy and sell signals so, it can’t be used alone must be combine with other indicators. It does require advance knowledge of market.

Signals of VWAP indicator?

When the price of a security is trading below VWAP the security is trading at discount on other hand when the security is trading above the VWAP security is trading at premium price.

VWAP indicator Conclusion

Moving VWAP tracks end-of-day VWAP averages over timeframe. The VWAP is a technical indicator to day traders. Whereas it requires a lot of effort and practice to make an effective use of VWAP. It helps to calculate liquidity. This can’t be use individually you must build strategies along it. It is best indicator in term of trend entry and price level. Usually take trades minutes to hours.

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