Here is an article that explains how Binance calculates its weighted average volatility (VWAP), as well as the movement interval used:
Understanding of Binance’s Vwap calculation
As a trader, it is essential to have a solid understanding of technical analysis tools and the way they are calculated. This tool is the price of medium weighted volatility (VWAP), widely used on cryptocurrency markets as Ethereum. In this article, we will sink in the way Binance calculates its VWAP value and explore the mobile interval used.
What is VWAP?
The weighted average volatility price (VWAP) is a measure of the average price of an activity for a certain period. It is calculated taking into account the volatility of the activity at that moment, rather than based on its current price. This approach provides a more accurate representation of market conditions and can help traders make more informed decisions.
Binance’s Vwap calculation
Binance uses an owner algorithm to calculate VWAP values for their platform. According to different sources, including Binance’s documentation, the VWAP calculation is based on the following steps:
- Historical price data : Binance collects historical prices for a resource in its vast database.
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- The weighted average price (WAP)
: calculated volatility is therefore used to generate an average weighted price for each trading day, taking into account the relative importance of different time intervals.
- Gamma of movement : Binance uses a specific movement interval, which is 1 minute (60 seconds). This means that the VWAP value will be traced every minute, reflecting the latest prices on prices.
MOVEMENT INTERVAL OPTIONS
While the default movement interval used by the binance is 1 minute, it is possible to configure the algorithm to use other time intervals. Some traders prefer to use:
* 1 hour (60 minutes) : this can provide a more accurate representation of market conditions for longer periods.
* 5 minutes (300 seconds) : a popular choice for technical analysis, this interval can help identify potential tendencies and reversal.
Limits and considerations
While Binance’s VWAP calculation is widely used on the cryptocurrency market, there are some limitations to consider:
* Quality of data : the precision of VWAP values depends on the quality of the data on historical prices. If the data are incomplete or inaccurate, the algorithm can produce incorrect results.
* Overlapping intervals : the use of different movement intervals can lead to overlapping calculations, which can lead to inconsistent and insecure vwap values.
As a trader, it is essential to keep up to date with the Binance policies in terms of data quality, data formats and potential changes in their algorithm. In addition, you should always consider the limits of technical analysis tools such as VWAP when they make trading decisions.
By understanding how Binance calculates its VWAP value and exploring several movement intervals, traders can improve their trading strategies and improve their general performance on the platform.
