The VWMA Breakouts strategy is a moving average-based breakout indicator designed by Ken Calhoun for swing trading in volatile markets. Its main purpose is to combine the beneficial properties of a simple moving average and a volume-weighted one. As the name implies, the volume-weighted moving average (VWMA) assigns different weights to the close price when calculating the average; greater weights being assigned to close price readings that have shown higher volume.

The indicator consists of two lines: an SMA of the close price, which acts as a trendline, and a VWMA line, being a signal line. When the price rises on high volume, the VWMA line is likely to be seen moving further away from the SMA, which may be regarded as a signal for uptrend continuation. Simulated trade signals are given upon crossovers of the VWMA and the SMA. When the VWMA crosses above the SMA, a buy to open signal is indicated. When it falls back below the SMA, a sell to close signal is given.

By default, a 50-period VWMA and a 70-period SMA lines are calculated; these values are suggested by the author for use on 15-day 15-minute charts. These values as well as the type of the moving average to be used as the trendline can be modified in the input parameters.

Input Parameters



vwma length The length of the volume-weighted moving average.
ma length The length of the moving average to be used as the trendline.
average type The type of the moving average to be used as the trendline.





The plot of the signal volume-weighted moving average.


The plot of the trendline moving average.

Further Reading

1. "Volume-Weighted Moving Average Breakouts" by Ken Calhoun. Technical Analysis of Stocks & Commodities, February 2017.

Backtesting is the evaluation of a particular trading strategy using historical data. Results presented are hypothetical, and there is no guarantee that the same strategy implemented today would produce similar results.

Technical analysis is not recommended as a sole means of investment research.

For educational purposes only. Not a recommendation of a specific security or investment strategy.

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