-Fast ( )
-Fast ( )
Comparing SMA's and VWMA's of the same length is a common trading tactic. Since is not taken into consideration when calculating Simple Moving Averages, we can gain valuable insights from the difference between the two lines.
Since should be increasing along with an upwards price movement, the should be greater than the during a volume-supported uptrend. Thus, we can confirm an uptrend if the remains greater than the . If the falls under the in the midst of an upwards price movement, however, that indicates divergence. The opposite is true for downtrends. If price is decreasing and is decreasing at the same time (as it should), then we can confirm the downtrend.
Interpreting the Graph:
If the slow is greater than the slow , then the area representing the difference between the two lines is filled in red. If the slow is greater than the slow , however, the area between the two is filled green.
If the fast is greater than the fast , then the area between the two dotted lines is filled in red. On the other hand, the area will be filled green if the fast is greater than the slow .
In addition to spotting divergences and confirming trends, the four lines can be used to spot breakouts. Typically, a crossover will precede the crossover. When the fast crosses over the slow and then a crossover follows shortly after, then it is a hint that a is beginning to form.