Volume Sigma Levels and Dynamic VWAP

The Volume Sigma Levels and Dynamic VWAP indicator identifies key price levels based on statistical volume spikes and projects these levels onto the price chart to assist in trend and reversal analysis. By calculating standard deviations of volume, the tool creates dynamic anchor points for VWAP and price levels, offering a comprehensive view of how volume activity influences price action across multiple timeframes.

Usage

The Usage section focuses on interpreting the volume-based projections and the resulting dynamic trend lines.

• Price Projections: When volume exceeds the 1, 2, or 3-sigma thresholds, the indicator plots horizontal levels based on the current price (HLC3). These levels act as potential support or resistance based on where high-volume activity occurred.
• Higher Timeframe (HTF) Analysis: The indicator can fetch volume spikes from a higher timeframe (defaulting to 60 minutes) and project those more significant levels onto your current chart. These appear as thicker lines and represent broader market interest.
• Dynamic VWAP: The script automatically anchors new VWAP calculations from the exact bars where volume exceeds the 2-sigma and 3-sigma levels. The area between these two dynamic VWAPs is shaded to highlight the current trend direction and momentum.

Details

This script operates on the principle that significant price movements are often preceded or accompanied by volume "climax" events.

1. Volume Standard Deviations: The tool calculates a Simple Moving Average (SMA) of volume and determines its standard deviation. It then sets three thresholds (Multipliers 1, 2, and 3).
2. Level Anchoring: When volume breaks these thresholds, the script captures the current price and maintains it as a "Sigma Level" until a new spike occurs.
3. VWAP Reset Logic: Unlike standard VWAPs that reset daily or weekly, these Dynamic VWAPs reset specifically when a new volume extremity is reached (Sigma 2 or 3), ensuring the benchmark reflects the most recent significant institutional or retail activity.

Settings

• Stdev Length: The lookback period used to calculate the average volume and its standard deviation.
• Multiplier 1/2/3: Sets the sensitivity for the volume spikes. Higher multipliers identify more extreme (and potentially more significant) volume events.
• Higher Time Frame: Allows users to select a timeframe from which to pull volume sigma levels to display on the current chart.

FAQ

How do I use the Higher Timeframe levels?

The thicker, semi-transparent lines represent volume spikes from the timeframe selected in the settings. These often act as "stronger" structural levels compared to the thinner current-timeframe lines.

What do the shaded areas represent?

The shaded area is the zone between the 2-sigma anchored VWAP and the 3-sigma anchored VWAP. It visualizes the core value area established since the last major volume expansion.

How can I access this tool?

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