Indicator Formula

Technical Details — Volume-Weighted Simple Moving Average (VWSMA)

Overview

The Volume-Weighted SMA (VWSMA) is functionally similar to VWAP — it calculates a simple average of volume-weighted prices over the lookback window. Each bar’s price is weighted by its volume relative to total volume in the period.

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Mathematical Derivation

Step 1 — Calculate VWSMA

Purpose: Sum volume-weighted prices and divide by total volume.

$$VWSMA[t] = \frac{\sum_{i=0}^{n-1} Close[t-i] \times Volume[t-i]}{\sum_{i=0}^{n-1} Volume[t-i]}$$

Where:

• $$n$$ = Period

What This Measures: Simple volume-weighted average price

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Compact Formula Summary

$$VWSMA[t] = \frac{\sum Close[i] \times Volume[i]}{\sum Volume[i]}$$

Default Parameter: Period (n) = 14

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Complete Calculation Example

With prices [44, 45, 46] and volumes [100, 300, 100]: $$VWSMA = \frac{44×100 + 45×300 + 46×100}{500} = 45.00$$

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Key Takeaways from the Example

1. Simplest VW Average: Just a volume-weighted arithmetic mean
2. Equivalent to Rolling VWAP: VWSMA over n bars is essentially a rolling VWAP
3. Drop-Off Effect: Like SMA, dropping a high-volume bar from the window can cause shifts
4. Requires Volume Data: Only meaningful with reliable volume data

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Caution

Important: VWSMA and VWAP are functionally equivalent — both calculate volume-weighted arithmetic means. The key difference is that VWAP traditionally resets daily (for institutional benchmarking), while VWSMA uses a rolling window. In Reversion, both use rolling windows.