Williams Variable Accumulation Distribution Index
Type
Volume indicator
Short introduction
Larry Williams developed the Williams Variable Accumulation Distribution Index (WVAD) as a turnover indicator to measure upward or downward pressure.
Statement
The WVAD fluctuates openly up and down around the zero line. The calculation is made by dividing the difference between the close and open price by the difference between the daily high and low (always greater than or equal to zero). This quotient must be between -1 and +1, this results from the rates used. Because the difference between close and open can be positive and negative, the result can also be positive or negative. This value is first multiplied by the daily turnover and then continuously added to the value of the previous day.
Formula/calculation
WVAD = (((C-0)/(H-L))*V)+I
where:
I = WVAD value previous day
Interpretation
The WVAD is a simple oscillator over price weighted by turnover. Because of this weighting, one can also speak of a trend follower to a certain extent. The results in the following possible interpretations:
A buy signal is generated when the WVAD crosses the zero line from below, a sell signal is generated when the WVAD crosses the zero line from above.
Another possibility is to calculate a MA via the WVAD and use the intersection of the two lines as a signal generator. A buy signal is generated when the WVAD indicator crosses its MA from bottom to top, a sell signal generated when the indicator crosses its MA from top to bottom.
As with other oscillators, leaving extreme zones can be used as a signal generator. However, it is problematic that the WVAD has no fixed limits, so you have to define the extreme zones yourself, which requires some experience! Leaving the upper extreme range is a sell signal, leaving the lower extreme range is a buy signal.
The first values calculated by the indicator should be ignored because it has to settle down first. What is particularly interesting about this indicator is that it also includes turnover in the interpretation. It can therefore provide quite early signals because falling turnover often indicates a change in trend.
Default setting
- Period: 20 periods
- Smoothing method: MA (Simple MA)
Smoothing methods you can select:
- MA (moving average) (default setting)
- EMA (exponential moving average)
- WMA (weighted moving average)
Example: Williams Variable Accumulation Distribution Index
