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Indicator Formula

Technical Details — Volume-Weighted Running Moving Average (VWRMA)

Section titled “Technical Details — Volume-Weighted Running Moving Average (VWRMA)”

Overview

Section titled “Overview”

The Volume-Weighted RMA (VWRMA) combines RMA smoothing with volume weighting. RMA’s slower decay (1/n weighting) produces a smoother result than VWEMA, making VWRMA ideal for identifying major volume-informed trends.

Mathematical Derivation

Step 1 — Calculate Volume-Weighted Price

Section titled “Step 1 — Calculate Volume-Weighted Price”

Purpose: Scale price by volume.

$$VWPrice[t] = Close[t] \times Volume[t]$$

What This Measures: Volume-scaled price

Step 2 — Apply RMA to Weighted Data

Section titled “Step 2 — Apply RMA to Weighted Data”

Purpose: Smooth using RMA’s 1/n weighting.

$$VWRMA[t] = \frac{RMA(VWPrice, n)[t]}{RMA(Volume, n)[t]}$$

Where:

  • $$RMA$$ uses $$\alpha = 1/n$$ (slower than EMA’s $$\alpha = 2/(n+1))$$

What This Measures: Very smooth volume-weighted average price

Compact Formula Summary

$$VWRMA[t] = \frac{RMA(Close \times Volume, n)}{RMA(Volume, n)}$$

Default Parameter: Period (n) = 14

Complete Calculation Example

VWRMA works like VWEMA but uses RMA smoothing (α = 1/n instead of 2/(n+1)), producing a smoother, more stable result.

Key Takeaways from the Example
  1. Smoothest VW Average: RMA’s slower decay produces the smoothest volume-weighted MA
  2. Less Responsive: Slower to react than VWEMA — better for major trend identification
  3. Reduced Volume Spike Impact: RMA dampens volume spikes more than EMA
  4. Requires Volume Data: Only meaningful on assets with reliable volume data