VWAP Gap Level

The VWAP Gap Level indicator identifies potential support and resistance levels by detecting significant price-volume discrepancies at the start of new daily sessions.

Usage

The indicator plots horizontal lines at specific price levels where a substantial "gap" in the Volume Weighted Average Price (VWAP) occurs between the close of one day and the open of the next. Traders can use these levels as areas of interest, based on the concept that these price gaps often act as magnets or significant pivot points that the market may revisit or "fill" later.

To use the tool effectively:

• Monitor the levels for potential price reversals or breakouts.
• Adjust the sensitivity of the gap detection using the "VWAP Gap %" setting to filter for more significant market moves.
• Observe how price reacts when returning to a historical gap level, as these often serve as institutional supply or demand zones.

Details

The script tracks the standard VWAP value across different sessions. At the start of every new daily candle, the script calculates the percentage change between the previous bar's VWAP and the current bar's VWAP. If this change exceeds the user-defined threshold, it signifies a "VWAP Gap."

Because VWAP represents the average price a security has traded at throughout the day, based on both volume and price, a large jump at the daily transition indicates a sharp shift in value perception. The script then anchors an extended horizontal line at the previous day's closing VWAP level to mark the origin of the gap.

Settings

• VWAP Gap %: Sets the minimum percentage change required between the previous day's VWAP and the new day's opening VWAP to trigger a level.
• Level Color: Allows users to customize the color of the horizontal support/resistance lines.
• Level Style: Changes the appearance of the line (Solid, Dotted, or Dashed).
• Level Width: Adjusts the thickness of the plotted levels.

FAQ

How do I access the VWAP Gap Level indicator?

You can get access on the LuxAlgo Library for charting platforms like TradingView, MetaTrader (MT4/MT5), and NinjaTrader for free.

What is considered a "good" gap percentage?

This depends on the volatility of the asset. For highly volatile stocks or crypto, a higher percentage (e.g., 0.5% or 1%) might be necessary to filter noise, while for stable forex pairs, a lower percentage may be more appropriate.

Does this indicator work on all timeframes?

While the logic is based on daily session changes, the indicator can be used on intraday timeframes (like 5m, 15m, or 1h) to see the specific levels where the daily gaps originated.