What is the volume-weighted average price MT4 INDICATOR? And how it works? are the main questions that come to the 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 security within a trade time duration. VWAP is more advanced a technical indicator that works on the ratio between total value traded over total volume traded. VWAP is useful it indicates the closing value of security and is best for day trading.
Volume weighted average price (VWAP) is an indicator that identifies the average price of a security and stock at a specific timeframe. It depends on the size of the transaction that takes place. The VWAP is an indicator that predicts the average price of the security for investment.
The formula of VWAP indicator:
VWAP=∑Price * Volume /∑Volume
Where Price is the 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 color lines.
- Time frame: short term few minutes, few hours, and day trading for any security
Advantage of VWAP indicator:
Due to the diverse nature of price in trading, it was difficult to analyze the accurate volume of transactions. VWAP is helping to predict the volume and future of the stock. It represents the closing price of a stock in a better way than other indicators (MA) and identifies liquidity price. The VWAP point average price at weighted volume and work the same for stock and securities on the MT4 trading platform. It allows trading on MT5 that trades for the future.
The VWAP is often used with trading a large number of trades during a given session. The VWAP is primarily suited for day traders. It gives an idea about large markets and range. VWAP works on the 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.
The disadvantage of VWAP Indicator:
The most important disadvantage is that it does not accurately predict the 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 combined with other indicators. It does require advanced knowledge of the market.
When the price of a security is trading below VWAP the security is trading at discount on another hand when the security is trading above the VWAP security is trading at a premium price.
VWAP indicator Conclusion
Moving VWAP tracks end-of-day VWAP averages over a time frame. The VWAP is a technical indicator for day traders. Whereas it requires a lot of effort and practice to make effective use of VWAP. It helps to calculate liquidity. This can’t be used individually you must build strategies along with it. It is the best indicator in terms of trend entry and price level. Usually take trades minutes to hours.