VWAP Bands

The VWAP Bands indicator integrates the Volume Weighted Average Price (VWAP) with multiple standard deviation bands to help traders identify potential support and resistance levels based on volume dynamics. It serves as a benchmark for price action, illustrating where a security is trading relative to its volume-weighted mean throughout the daily session.

Usage

The VWAP Bands tool can be used to gauge the current trend and identify overextended price levels. When price remains above the central VWAP line, it indicates a bullish session sentiment, whereas trading below suggests bearishness. The standard deviation bands act as dynamic zones:

• Mean Reversion: Traders often look for price to return to the central VWAP line after touching the outer bands (e.g., the second or third projections).
• Trend Confirmation: Sustained trading outside the first projection bands can signal a strong directional move.
• Historical Reference: Enabling the "Previous VWAP Close" allows users to see where the prior session's value ended, which often acts as a significant pivot level.

Details

This script calculates the VWAP by accumulating the product of price (HL2) and volume, then dividing by the total volume since the start of the trading day. The bands are calculated using a standard deviation formula that accounts for volume weight. Unlike standard Bollinger Bands, these bands reset at the start of each new daily session, providing a localized view of price volatility relative to institutional volume.

Settings

• Show Previous VWAP Close: Toggles the visibility of the VWAP level from the previous session.

Projection One

• Show First Projection: Enables or disables the first set of deviation bands.
• +1 Projection: Sets the multiplier for the upper first band.
• -1 Projection: Sets the multiplier for the lower first band.

Projection Two

• Show Second Projection: Enables or disables the second set of deviation bands.
• +2 Projection: Sets the multiplier for the upper second band.
• -2 Projection: Sets the multiplier for the lower second band.

Projection Three

• Show Third Projection: Enables or disables the third set of deviation bands.
• +3 Projection: Sets the multiplier for the upper third band.
• -3 Projection: Sets the multiplier for the lower third band.

FAQ

How do I use the different projection levels?

The projection levels are multipliers of the standard deviation. Higher values (like the 2.62 default in Projection Three) represent further price extensions and are typically viewed as major exhaustion or reversal zones.

Why do the lines jump at the start of the day?

The indicator is designed for intraday sessions. It resets its calculations at the start of every new day to ensure the data reflects only the current session's volume and price action.

How can I access VWAP Bands?

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