Volume Weighted Awesome Oscillator is a trading algorithm based on a modification of the standard Forex indicator Awesome Oscillator, calculations of which are aimed at calculating market volumes. Thus, the calculation of the indicator determines the strength of trading volumes, and depending on this, the moment of opening a certain trade. The indicator is presented in the lower window of the price chart in the form of a histogram that changes its color and direction depending on the current market conditions.
The Volume Weighted AO indicator works equally effectively on any timeframe, using any currency pairs, so their choice does not matter.
The settings of the Volume Weighted AO indicator consist of several sections. The Input Parameters section is responsible for its technical work, the Colors section is responsible for visualization, and the Levels section is responsible for adding signal levels to its window.
-Volume to use - parameter responsible for choosing the volume for calculations. By default, it has the Tick volume value.
The Volume Weighted AO indicator is very easy to use due to its visualization, and also due to the fact that its application algorithm is similar to other histogram indicators. To open a certain trade, it should be taken into account the volume of similar trades in the current market, for this it should be considered the color and direction of the indicator histograms columns. If there is a high volume of Buys in the current market, long positions are opened, if the volume of Sells - short positions. If the volume dominant decreases or changes, trades are closed.
Signal for Buy trades:
- At least three columns of the indicator's histogram are directed upwards and have a color with a growth value. At the same time, the new column is higher than the previous one.
Upon receipt of such conditions on a signal bullish candle, a buy trade can be opened. Upon receipt of the opposite conditions from the indicator, namely, when the color or direction of the histogram changes, the current trade should be closed and a new one should be considered.
Signal for Sell trades:
- The histogram of the indicator is directed downwards and its columns have a color with a falling value. New columns are formed below the previous ones.
A sell trade can be opened immediately upon receipt of such conditions on a bearish candle. The current trade should be closed when the color or direction of the indicator histogram changes. At this moment, a decrease or change in volumes is possible and it should be considered opening a new trade.
The Volume Weighted AO indicator is a fairly effective trading algorithm based on the use of a standard forex indicator. To improve the accuracy of its signals and trading in general, it is recommended to use it with additional indicators, filters and advisers. It is very easy to use, however, before using it, practice on a demo account is recommended.