A volume weighted moving average next to a plain EMA

[Fairman]

A volume weighted moving average next to a plain EMA

A volume weighted moving average gives more weight to bars with more volume. On FX that means tick volume, since there's no central volume figure, but tick volume tracks activity reasonably well within a single broker's feed.

Put a 20 period VWMA and a 20 period EMA on the same M5 chart and they mostly sit close together. The interesting moments are when they separate.

If the VWMA sits above the EMA in an uptrend, the higher volume bars have been happening at higher prices. Activity is supporting the move. If the VWMA drops below the EMA while price is still rising, the recent up bars came on lighter activity and the heavier bars were lower down. That's a sign the push is thinning out.

It's a subtle tool. The gap between the two lines is usually small, and on quiet sessions it barely moves. It's most informative during the active hours when volume varies a lot from bar to bar, like the London open or the first hour of New York.

I wouldn't use it as a crossover system. The crosses are frequent and mostly meaningless. As a context line, sitting next to a plain EMA you already use, it adds a small piece of information about where activity has been concentrated.

[FXS London Scalper]

Tick volume is the catch with a VWMA on FX, as you say, and it has a session pattern of its own. Tick counts jump at 08:00 London and again at 13:30, so a 20 period VWMA on M5 straddling the open gives the first London bars far more weight than the Asian bars before them. A separation between the VWMA and the EMA in the first hour is partly just the open arriving. It tends to mean more later in the morning, when activity is steadier and a gap between the two lines reflects where the heavier bars printed rather than the clock.

[Fairman]

Broker feed differences matter more for this than for most indicators. Since the VWMA depends on tick volume, two brokers with different quote rates will produce different VWMA lines even on the same price data. The shape of the difference between VWMA and EMA tends to be similar across brokers, but the exact values won't match. If you share charts with other traders or compare notes, keep in mind that a VWMA reading from one platform isn't directly comparable with another. It's best used as a relative tool on your own feed, watching how the gap changes rather than reading the absolute level of either line.

[Fairman]

The calculation is simple if your platform doesn't include it. For each bar, multiply the close by the tick volume, sum that over the period, then divide by the sum of volumes over the same period. Most platforms have it built in under some name, but writing it yourself in Pine or MQL takes a few lines and makes it easy to plot the difference between VWMA and EMA as a separate histogram. That histogram is often easier to read than two lines that sit nearly on top of each other on the main chart, especially on a busy layout with levels already drawn.

[Fairman]

News bars will dominate the VWMA for a while after a release. A single bar with several times normal volume pulls the average strongly toward its price, and that effect lasts for the full length of the period. On a 20 period M5 VWMA, a release bar will keep influencing the line for well over an hour and a half. That can make the VWMA look like a level in its own right after news, which sometimes it is, since a lot of activity happened there. It's still good to know why the line is sitting where it is, rather than treating it as a normal reading.

[Fairman]

Session VWAP is the more common volume based tool, and it's reasonable to ask why use a VWMA instead. The difference is the window. VWAP accumulates from a fixed starting point, usually the session open, so it becomes slower as the session goes on. A VWMA has a rolling window, so it keeps responding at the same speed throughout. For a scalper who wants a volume weighted reference that doesn't flatten out by midday, the rolling version can be more useful, while VWAP stays better for judging the session's overall value area. Watching the VWMA during the London open on a few sessions is the quickest way to see how much it differs from VWAP in practice.

[WhitG47]

Tried something like this a while back... put the same 20 period VWMA on my main broker and on an old demo account I'd forgotten I had. Same pair, same M5 candles, and the lines were definately not the same, wich threw me for a good ten minutes.

Mind you, I'd spent most of that evening convinced I'd typed the formula wrong, and ended up rewriting it twice before I noticed the demo feed was ticking about half as often as the other one. Can't be bothered with that sort of faff again, but fair play to teh old demo for showing me up.

G.

[Shadow Trader]

There is a popular claim that a burst of volume on the CME currency futures shows up a moment before spot reacts. Sometimes that is what it looks like on a screen, but the explanation matters.

Futures and spot are linked by arbitrage, and they trade on different infrastructure. Futures prices carry a precise exchange timestamp. Spot prices on a retail platform arrive through a broker, with its own aggregation delay and sometimes a deliberate smoothing step. So a futures spike may appear to lead simply because the retail feed is slower, not because the futures market is the origin of the move.

That distinction decides whether it is usable. A lead of a few hundred milliseconds is real information for a fast system but is useless to someone clicking an order manually. A lead of several seconds would be more interesting, and it tends to appear around scheduled data, when futures liquidity is deepest and spot quotes are being pulled.

Another point: volume alone does not give direction. A spike needs the price change on the future itself to mean anything.

What lead time, if any, have you measured between a futures burst and your broker's spot chart?

[FXS Prop Desk]

The gap between those two averages is a nice way to see where the volume sits. One caution for FX: tick volume can jump during news even when real participation is moderate, simply because quotes update faster. A gap between the two averages around a release might reflect that rather than real conviction. Ignoring the separation in the few minutes after major releases, or marking those bars on the chart, would keep the signal cleaner.