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Improved Moving AveragesVolume Weighted IndicatorsBy applying volume weighting to classical movingaverages, we are able to develop a much better—and faster—moving average that helps us enter themarket at better chart points AND helps protectus from a premature exit. It’s called the VolumeWeighted Moving Average, or VWMA, and it’sincluded in Volume Systems 2.0.The chart to the right for Royal Caribbeandemonstrates the concept. You can see that inMarch 2009, price crossed the 100 period VolumeWeighted Moving Average a full 5 days beforeit crossed the Exponential Moving Average—ata price difference of 20%. If we were using the100 bar Exponential Moving Average we wouldhave entered our Long position at a significantdisadvantage. Plus, if you follow the blue line, youwill see that the price chart maintains separationabove the line, keeping us in the trade longer.Volume Weighted MACDVWMA – a faster, cleanermoving average.$10.25$8.75We used VWMA to create a similar Systemto MAC-M, which is based on the differencebetween the 12 and 26 period Exponential MovingAverages. If you look at the chart to the right forGoldman Sachs, you will see that the new Systemvirtually eliminated whipsaw Signals!Why does this work? If you look carefully at theindicator, you can see that the volume weightingadjusts the curve towards the peaks and valleys.This pulls it away from the “trigger line” so itdoes not fire on the little “wiggles” or whipsawsthat hinder the MAC-M System.whipsawsOur System testing shows a significantimprovement in results for VWMACD overMACD by itself. If you are using the MAC-MSystem, you will want to consider replacing itwith this System.VWMACD-C (lower) is compared to the MAC-M system. Notice that while theSignals are similar, several whipsaws were avoided.8