Volume-weighted MACD

What is the Volume-weighted MACD?

The Volume-weighted MACD swaps the averages inside MACD: instead of subtracting a slow EMA from a fast EMA of price, it subtracts a slow VWMA from a fast VWMA (implementations commonly keep the familiar 12 and 26 lengths) and smooths the difference into a signal line, most often a 9-period EMA. A VWMA multiplies each close by its volume and divides the sum by the window's total volume, so heavily traded bars pull the lines hard while quiet drift barely moves them.

The design, associated with volume analyst Buff Dormeier, lets participation decide how much each bar's price counts. A rally on expanding volume accelerates the volume-weighted line ahead of its price-only counterpart; a drift higher on thinning volume leaves it lagging or unconvinced. That comparison is the indicator's distinctive read, a computed cousin of the effort vs result principle: it asks whether volume sits on the same side as price.

How traders use it

• With MACD's normal signal set (line/signal crossovers, zero-line crosses, histogram turns), where volume weighting is built into each signal because thin-volume moves carry little weight in the averages.
• Overlaid against the classic MACD: the volume-weighted line running stronger argues volume backs the trend, while a weaker line flags participation failing to keep pace.
• For divergence against price, which here doubles as a volume divergence read: a new price high the indicator refuses to confirm means volume-weighted prices are not following.
• As a breakout filter, since a thrust on heavy volume at the breakout moves VWMA-based lines faster than the same thrust on thin tape.

Volume-weighted MACD vs. related indicators