The Volume Weighted MACD indicator (VW-MACD) was created by Buff Dormayer and is described in his book Investing With Volume Analysis. It represents the convergence and divergence of volume-weighted average price trends.

The use of volume makes the VW-MACD more sensitive and reliable in relation to the traditional MACD.

What is the MACD (Moving Average Convergence Divergence)?

Moving
Average Convergence Divergence was created by Gerald Appel in 1979. The standard MACD plots the difference between the short-term exponential average and the long-term exponential average. When the difference (the MACD line) is positive and growing, it indicates an uptrend. When the MACD line is in the negative zone, it indicates a downtrend.

The smoothed exponential average of this difference is calculated to form the MACD signal line. When the MACD line is above the MACD signal line, this indicates an increase in the strength of the MACD. Similarly, when the MACD line is under the MACD signal line, the strength of the MACD decreases. This difference between the MACD line and the MACD signal line is often plotted as a histogram to show the difference between these lines.

What is the difference between the MACD and the VW-MACD? 

[spoiler title=”Read More…”]

When calculating the difference, the MACD Volume Weighted MACD
replaces two exponential moving averages with two corresponding volume-weighted moving averages. Thus, the VW-MACD separates the volume-weighted short-term trend from the volume-weighted long-term trend.

The signal line remains as an exponential moving average because the VW-MACD line is already volume-weighted. 

Volume-Weighted MACD for MetaTrader 5 

The VW-MACD indicator provides 4 types of output data:

• The MACD line is a solid gray line;
• Signal line-intermittent red line;
• Growth of the MACD histogram – green bar;
• Decrease in the MACD histogram – red bar.

The VW-MACD histogram is amplified by a multiplier so that all changes are clearly distinguishable.

[/spoiler]