VWAP Relative Strength Index

The VWAP Relative Strength Index indicator integrates Volume Weighted Average Price (VWAP) into the standard RSI calculation to provide a momentum oscillator that accounts for both price and volume. This tool helps traders identify trend shifts and potential entry/exit points by analyzing the relationship between current market value and historical volume-weighted activity.

Usage

The VWAP Relative Strength Index can be used to identify bullish and bearish momentum shifts based on color-coded signals and moving average crossovers.

• Bullish Signals: When the RSI line turns green, it indicates bullish momentum. This often occurs when the RSI crosses above its exponential moving average (EMA) or exits the oversold zone.
• Bearish Signals: When the RSI line turns red, it indicates bearish momentum. This typically happens when the RSI crosses below its EMA or exits the overbought zone.
• Overbought/Oversold Levels: The indicator features horizontal lines at 80 (overbought) and 20 (oversold) to highlight extreme market conditions.
• Bar Coloring: When enabled, the chart bars will change color to match the indicator's trend signal, allowing for easier trend visualization directly on the price action.

Details

Unlike the traditional Relative Strength Index which uses the closing price as its source, this version utilizes the Volume Weighted Average Price (VWAP). By substituting Close for VWAP, the RSI becomes more sensitive to price levels where high volume has occurred.

The calculation involves:

1. Fetching the VWAP value (optionally from a different timeframe).
2. Calculating gains and losses based on the VWAP's change.
3. Smoothing these values using an Exponential Moving Average (EMA) to derive the RSI.
4. Comparing the RSI to an EMA of itself to generate trend signals.

Settings

• Resolution: Determines the timeframe from which the VWAP source is pulled.
• Allow Repainting?: Toggles whether the indicator uses data from the current (unconfirmed) candle for higher timeframe calculations.
• Allow Bar Color Change?: Enables or disables the modification of price bar colors based on the indicator's signal.
• Length: The lookback period used for the RSI calculation and the internal signal EMA.
• ObLevel: The threshold level used to define overbought conditions (default is 80).
• OsLevel: The threshold level used to define oversold conditions (default is 20).

FAQ

How do I interpret the color changes on the VWAP RSI? A green line represents bullish momentum, often triggered by a crossover of the RSI above its signal line. A red line represents bearish momentum, triggered by a crossunder.

Can I use this on different timeframes? Yes, you can adjust the "Resolution" setting to pull VWAP data from a different timeframe than your current chart, or leave it blank to use the chart's native timeframe.

How can I access the VWAP Relative Strength Index? You can get access on the LuxAlgo Library for charting platforms like TradingView, MetaTrader (MT4/MT5), and NinjaTrader for free.