VWAP oscillator

The VWAP oscillator indicator visualizes the percentage difference between the Volume Weighted Average Price (VWAP) and the current price, helping traders identify trend strength and potential mean-reversion opportunities.

Usage

The VWAP oscillator can be used as a momentum filter or a mean-reversion tool. When the oscillator is within the user-defined "threshold zone" (represented by the shaded background), price action is often considered choppy or non-trending. Conversely, when the oscillator moves outside of these bounds, it indicates a significant trend is underway.

Traders may also use the zero-line as a magnet; since price frequently returns to the VWAP, extreme readings in the oscillator can signal potential profit-taking zones where price might revert to the mean.

Details

The indicator calculates the VWAP based on a selectable anchor period (such as Session, Week, or Month). It then computes the percentage deviation of the current close from that VWAP value.

The formula used is: ((Close / VWAP) - 1) * 100.

This normalization allows traders to see exactly how far price has extended relative to its volume-weighted average across different assets, regardless of their nominal price. The inclusion of alerts for threshold crossings allows for automated monitoring of trend breakouts.

Settings

• Anchor Period: Determines the timeframe at which the VWAP calculation resets (e.g., Session, Week, Year, or even corporate events like Earnings).
• Source: The price input used for the VWAP calculation (defaults to HLC3).
• Threshold: Sets the upper and lower bounds for the "choppy" zone. This value represents a percentage (e.g., 1.0 = 1%).

FAQ

How do I interpret the zero line?

The zero line represents the exact point where the current price is equal to the VWAP. Values above zero indicate price is trading at a premium to the average, while values below zero indicate a discount.

Can I use this for intraday trading?

Yes, by setting the Anchor Period to "Session," the indicator provides a standard intraday VWAP perspective, which is a common benchmark for day traders.

How do I access the VWAP oscillator?

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