What is volume weighted average price MT4 INDICATOR? And how it works? are main questions that come in 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 is indicator that show the average price in the market that traders are willing to pay for a security within a trade time duration. VWAP is more advanced a technical indicator developed in 1984 by James Elkins. VWAP work on ratio between sum of amount traded over whole volume of security traded.Volume weighted average price (VWAP) is an indicator which identifies size of transaction that takes place and predict average price of security for a timeframe.
Formula of VWAP indicator:
VWAP= T Price X Volume /Volume
Where Price is typical price (average of the High, Low and Close price) and V is Volume
Features of VWAP indicator.
- Platform are: Meta Trader 4
- Use charted graph for presentation and use different colour lines.
- Timeframe: short term few minutes, few hours and day trading for any security.
- Assets: stock and securities.
Advantage of VWAP indicator:
Trading is a difficult and risky thing and when it comes to price in market it is always moving so VWAP help to identify volume traded and moving on same direction what will be future volume in same environment.
It has better program to predict the closing price of stock in comparison to other indicators. It gives edge to traders to find liquidity price. The VWAP is designed in a way to point average price at weighted volume on MT4 trading plat form. It allows to trade on MT5 that trade for future. The VWAP is primarily suited for the day traders. It gives idea about large markets and potential range. VWAP minimizes the risk because VWAP is a technical indicator. The VWAP is used in short time frames and does require a lot of practice
Disadvantage of VWAP Indicator:
Most important disadvantage is that it does not accurately predict true value of currencies. VWAP does not generate buy and sell signals so, it can’t be used alone must be combine with other indicators. It does require advance knowledge of market.
Signals of VWAP indicator?
When the price of a security is trading below VWAP level the security is trading at discounted price and when the security is trading above the VWAP level security is trading at premium price.
Conclusion Volume Weighted Average Price indicator:
VWAP is useful indicator it indicates closing value of security and best for day trading. The VWAP is a technical indicator to day traders and it is difficult to understand Whereas it requires a lot of effort and practice to make an effective use of VWAP. It helps to calculate liquidity but not exact. This can’t be use individually you must use it with other combination. It is best indicator in term of trend entry and price level. Usually take trades minutes to hours. VWAP have ability to work with multi trades.