Volume Weighted MACD: MACD built from volume-weighted averages

What it measures

Volume Weighted MACD is the standard MACD construction — a short average minus a long one, with a signal line — built on volume weighted moving averages instead of exponential ones.

The effect is that quiet bars barely move either average, so the resulting momentum reading reflects where the trading actually happened.

A drift on no volume, which shifts ordinary MACD, leaves this one almost unchanged.

How it is calculated

These are the steps Basis performs, verified against the published definition.

1. 1

   Compute a volume weighted moving average over the fast period.

2. 2

   Compute one over the slow period.

3. 3

   Subtract the slow from the fast to get the MACD line.

4. 4

   Take a moving average of that line for the signal, and plot the difference as a histogram.

Settings

Twelve, twenty-six and nine carry over from MACD. Since the averages are windowed rather than exponential, the slow period also controls how long a volume spike keeps distorting the line.

How to read it

• Read it exactly as ordinary MACD: signal crossings, zero crossings, histogram, divergence.
• The difference shows up during quiet drifts and low-volume weekends, where this version stays flat and the ordinary one wanders.
• Running both and watching where they disagree is more informative than replacing one with the other.
• It reacts faster than ordinary MACD to a genuine high-volume move, because that volume dominates the weighting immediately.
• The best use is as a second opinion rather than a replacement. When ordinary MACD turns and this one does not, the turn happened on bars nobody was trading, and that is a distinction no single momentum indicator can make on its own.

Where it misleads

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