Volume Weighted Average Price Oscillator

The Volume Weighted Average Price Oscillator indicator provides a momentum-based perspective on price action by calculating the percentage difference between price and its Volume Weighted Average Price (VWAP) components, helping traders identify trend shifts and relative strength.

Usage

The indicator consists of two primary components: the main VWAPPO histogram and the Power Level line. Traders can use the VWAPPO histogram to gauge the immediate distance between the current price and the 28-period SMA of the VWAP.

The Power Level line acts as a signal line, representing the relationship between a 14-period SMA of price and a 14-period SMA of the VWAP average. When the Power Level line changes color to green, it indicates increasing upward momentum; a change to red suggests weakening momentum or a potential trend reversal. Crossovers between these components can be used to identify areas of overextension or trend continuation.

Details

The script functions similarly to a Percentage Price Oscillator (PPO) but substitutes standard moving averages with VWAP-derived calculations.

• VWAPPO: Calculated as (Price - SMA(VWAP, 28)) / SMA(VWAP, 28) * 100.
• Power Level: Calculated as (SMA(Price, 14) - SMA(SMA(VWAP, 28), 14)) / SMA(SMA(VWAP, 28), 14) * 100. By using VWAP as the baseline, the oscillator incorporates volume data into the momentum calculation, which can often provide more reliable signals than price-only oscillators during periods of high market activity.

Settings

• Blockchain: A boolean toggle that enables an additional visual shape on the chart representing the normalized difference between the long-term VWAP average and its secondary smoothing.

FAQ

How do I interpret the color changes on the Power Level line?

The color change is based on the slope of the Power Level line. A green line indicates the current value is higher than the previous bar's value (upward momentum), while a red line indicates it is lower (downward momentum).

Can this indicator be used on all timeframes?

Yes, the Volume Weighted Average Price Oscillator adapts to any timeframe. However, since it relies on VWAP, the signals may be more significant on intraday timeframes where volume fluctuations are more pronounced.

How can I access the Volume Weighted Average Price Oscillator?

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