Volume Weighted MACD + RSI

The Volume Weighted MACD + RSI indicator is a momentum-based tool that integrates volume data into moving average calculations alongside relative strength analysis to identify trend direction and potential market reversals.

Usage

The indicator can be used to identify market sentiment based on the color-coded histogram and the relationship between volume-weighted momentum and RSI levels.

• Bullish Market (Green Zone): When the RSI is above the specified bullish threshold (default 60), the histogram turns green, suggesting strong upward momentum.
• Bearish Market (Red Zone): When the RSI is below the specified bearish threshold (default 40), the histogram turns red, suggesting strong downward momentum.
• Neutral/Potential Reversal (Grey Zone): When the RSI is between the bullish and bearish thresholds, the histogram is colored grey/blue, indicating a lack of strong trend or a potential reversal area.

Traders often monitor zero-line crossovers of the volume-weighted MACD histogram as signals for shifts in trend momentum.

Details

This script enhances the traditional MACD calculation by weighting the moving averages by volume. Instead of standard EMAs, it calculates the ratio of the EMA of (Volume * Price) to the EMA of Volume. This ensures that price movements occurring on higher volume have a greater impact on the indicator's output.

The inclusion of an RSI filter provides a secondary layer of confirmation, ensuring that momentum signals are aligned with overall relative strength before categorizing the market state.

Settings

• MA fast: The period for the fast volume-weighted exponential moving average.
• MA slow: The period for the slow volume-weighted exponential moving average.
• Length: The smoothing period for the MACD signal line and the RSI calculation.
• RSI bearish: The threshold below which the market is considered bearish (Red Zone).
• RSI bullish: The threshold above which the market is considered bullish (Green Zone).

FAQ

How do I interpret the histogram colors?

The histogram colors represent the confluence of volume-weighted momentum and RSI levels. Green indicates bullish strength, red indicates bearish strength, and grey indicates a neutral or transitional phase.

What makes this different from a standard MACD?

Unlike a standard MACD which only uses price, this version uses volume-weighted moving averages, meaning it reacts more significantly to price changes supported by high trading volume.

How can I access this tool?

You can get access on the LuxAlgo Library for charting platforms like TradingView, MetaTrader (MT4/MT5), and NinjaTrader for free.