VWMA/SMA Delta Volatility (Statistical Anomaly Detector)

The VWMA/SMA Delta Volatility (Statistical Anomaly Detector) indicator is a statistical tool designed to identify and visualize extreme price movements by analyzing the relationship between short-term and long-term trends. By calculating the difference between a Volume Weighted Moving Average (VWMA) and a Simple Moving Average (SMA), it detects periods of abnormal market volatility relative to a normal distribution.

Usage

The indicator is primarily used to spot trend exhaustion or sudden volatility spikes that deviate from the statistical norm. Traders can use the normalized histogram and Z-score channels to gauge market sentiment:

• Positive Anomalies (Green Bars): Occur when the VWMA/SMA delta rises above the upper Z-score filter, indicating strong upward momentum or a potential overextension.
• Negative Anomalies (Red Bars): Occur when the delta falls below the lower Z-score filter, indicating strong downward pressure or a potential oversold condition.
• Normal Range (Blue/Neutral Bars): Indicates that price action is within typical statistical bounds, suggesting a period of consolidation or a stable trend.

The Z-score channel helps filter out market noise by providing dynamic thresholds that adjust based on historical volatility.

Details

The script operates on the hypothesis that the difference between the VWMA (which accounts for volume) and the SMA (which does not) reveals the "true" strength of a price movement. The "MA Delta" is calculated as VWMA - SMA.

To identify anomalies, the tool performs a rolling statistical analysis on this delta over a user-defined sample size. It calculates the moving average (mean) and standard deviation of the delta values. These results are then normalized to a fixed scale of -100 to 100, allowing for consistent visualization across different assets and timeframes regardless of their nominal price value.

Settings

• Source: The price component used for the calculations (e.g., Close, HL2).
• MAs Length: The period used for both the VWMA and SMA calculations.
• Statistical Sample Size: The number of bars used to calculate the mean and standard deviation for the normal distribution.
• Z-score: The multiplier for the standard deviation. A higher value makes the indicator less sensitive, requiring more extreme moves to trigger an anomaly signal.
• Z-score Channel: Toggles the visibility of the upper and lower filter lines on the histogram pane.

FAQ

How do I interpret the histogram colors? Green bars signify positive volatility anomalies exceeding the upper Z-score bound, while red bars signify negative anomalies exceeding the lower bound. Neutral bars represent price action within the normal range.

What is the benefit of using VWMA versus SMA in this delta? The VWMA places more weight on price levels with higher trading volume, while the SMA treats all bars equally. The difference between them highlights where volume-weighted momentum is diverging from the simple average price.

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.