VWMA/SMA 3Commas Bot

This strategy utilizes two pairs of different Moving Averages, two Volume-Weighted Moving Averages (VWMA) and two Simple Moving Averages (SMA).

There is a FAST and SLOW version of each VWMA and SMA.

The concept behind this strategy is that volume is not taken into account when calculating a Simple Moving Average.

Simple Moving Averages are often used to determine the dominant direction of price movement and to help a trader look past any short-term volatility or 'noise' from price movement, and instead determine the OVERALL direction of price movement so that one can trade in that direction (trend-following) or look for opportunities to trade AGAINST that direction (fading).

By comparing the different movements of a Volume-Weighted Moving Average against a Simple Moving Average of the same length, a trader can get a better picture of what price movements are actually significant, helping to reduce false signals that might occur from only using Simple Moving Averages.

The practical applications of this strategy are identifying dominant directional trends. These can be found when the Volume Weighted Moving Average is moving in the same direction as the Simple Moving Average, and ideally, tracking above it.

This would indicate that there is sufficient volume supporting an uptrend or downtrend, and thus gives traders additional confirmation to potentially look for a trade in that direction.

One can initially look for the Fast VWMA to track above the Fast SMA as your initial sign of bullish confirmation (reversed for downtrending markets). Then, when the Fast VWMA crosses over the Slow SMA, one can determine additional trend strength. Finally, when the Slow VWMA crosses over the Slow SMA, one can determine that the trend is truly strong.

Traders can choose to look for trade entries at either of those triggers, depending on risk tolerance and risk appetite.

Furthermore, this strategy can be used to identify divergence or weakness in trending movements. This is very helpful for identifying potential areas to exit one's trade or even look for counter-trend trades (reversals).

These moments occur when the Volume-Weighted Moving Average, either fast or slow, begins to trade in the opposite direction as their Simple Moving Average counterpart.

For instance, if price has been trending upwards for awhile, and the Fast VWMA begins to trade underneath the Fast SMA, this is an indication that volume is beginning to falter. Uptrends need appropriate volume to continue moving with momentum, so when we see volume begin to falter, it can be a potential sign of an upcoming reversal in trend.

Depending on how quickly one wants to enter into a movement, one could look for crosses of the Fast VWMA under/over the Fast SMA, crosses of the Fast VWMA over/under the Slow SMA, or crosses over/under of the Slow VWMA and the Slow SMA.

This concept was originally published here on TradingView by ProfitProgrammers.
Here is a link to his original indicator script:
I have added onto this concept by:

  • converting the original indicator into a strategy tester for backtesting
  • adding the ability to conveniently test long or short strategies, or both
  • adding the ability to calculate dynamic position sizes
  • adding the ability to calculate dynamic stop losses and take profit levels using the Average True Range
  • adding the ability to exit trades based on overbought/oversold crosses of the Stochastic RSI
  • conveniently switch between different thresholds or speeds of the Moving Average crosses to test different strategies on different asset classes
  • easily hook this strategy up to 3Commas for automation via their DCA bot feature

Full credit to ProfitProgrammers for the original concept and idea.
Any feedback or suggestions are greatly appreciated.

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