If you've been trading forex for a while, you know that major pairs often lack volume data. But don't worry—one of the go-to indicators for volume insight is Larry Williams' Variable Accumulation Distribution, or WVAD for short.
The basic mathematical formula for WVAD is:
Essentially, the (close-open) signal gives you the direction of the market—positive for an uptrend and negative for a downtrend. More importantly, it helps quantify the volume needed to actually drive price changes.
This indicator fell out of favor in the late 1970s due to its complexity. However, it still offers valuable insights. When volume data isn't available, the WVAD adjusts to the open-close ratio compared to high-low. The code even incorporates a comparison between Ask and Bid prices, which adds reliability, especially for other instruments where placing limit orders in pre-market can skew these values. This is particularly true for WDO/DOL futures at the Brazilian BMF Bovespa.
This version of the WVAD calculates values based on the current bar within the active time-frame.
The basic formula for the code looks like this:
((close[i] - open[i])/(high[i] - low[i]))*(volume[i])
So, if you're looking to enhance your trading strategy, incorporating the WVAD indicator could give you a better edge in understanding market dynamics. Happy trading!
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