Volume Moving Average - VMA

This is an indicator used in charts and technical analysis. It refers to the average volume of a security, commodity or index constructed in a period as short as a few minutes or as long as several years and shows trends for the latest interval. As each new variable is included in calculating the average, the last variable of the series is deleted.

This has to be one of the most important tools for our indicators. This is where you select the moving average period to apply to the volume. Normally, volume can be somewhat turbulent and you may see surges here and there due to some large trades. With the volume moving average (VMA) you can smooth out those fluctuations so you can see where the general direction of the volume is going (i.e. increasing or decreasing).

Generally, when an index decreases and a volume moving average increases at the same time, you can expect a reversal in the index at the point the VMA surge peaks and begins to decrease again. The same is true for when an index is increasing.

Below is a list of recommended VMA settings for every period in our charts. We recommend the following VMA settings because they tend to work the best in showing signals of future market trends.

Table #1: Recommended VMA settings  Period SBV VMA Period Fast VMA Slow VMA 1 bar value Intraday Indicators  2-Hour Period 1-20 bars 1-20 bars 40-100 bars 1 minute  1-Day Period 5-30 bars 5-30 bars 60-100 bars 1 minute Short-Term Indicators  5-Day Period 7-25 bars  7-25 bars 70-200 bars 5 minutes  15-Day Period 7-25 bars 7-25 bars 70-200 bars 15 minutes  30-Day Period 7-25 bars 7-25 bars 70-200 bars 30 minutes  60-Day Period 7-25 bars 7-25 bars 70-200 bars 1 hour Mid-Term Indicators  3-Months Period 3-8 bars 3-8 bars 40-80 bars 1 day  6-Months Period 3-8 bars 3-8 bars 40-80 bars 1 day  1-Year Period 3-8 bars 3-8 bars 40-80 bars 1 day  1.5-Year Period 3-8 bars 3-8 bars 40-80 bars 1 day  2-Year Period 3-8 bars 3-8 bars 40-80 bars 2 days Long-Term Indicators  3-Year Period 3-8 bars 3-8 bars 40-80 bars 3 days  4-Year Period 3-8 bars 3-8 bars 40-80 bars 3 days  5-Year Period 3-8 bars 3-8 bars 40-80 bars 5 days  7-Year Period 3-8 bars 3-8 bars 40-80 bars 7 days  10-Year Period 3-8 bars 3-8 bars 40-80 bars 10 days  Weekly 3-8 bars 3-8 bars 40-80 bars 1 week  Monthly 3-8 bars 3-8 bars 40-80 bars 1 month

Be careful! You should not set the volume moving average too high or too low, as you will either smooth out the volume too much or make it too erratic. For example, on a 5-day chart, a 60-minute VMA works best, and for a 1-day chart, a 30-minute VMA works well.