Anchored VWAP & Standard Deviations

The Anchored VWAP & Standard Deviations indicator calculates the Volume Weighted Average Price starting from a specific user-defined point in time and provides eight levels of standard deviation bands to identify key support and resistance areas.

Usage

This tool is used to identify the average price of an asset since a significant market event, such as a high, low, or news release. Traders can use the Anchored VWAP (AVWAP) as a dynamic trend line, while the multiple standard deviation bands act as overextended price targets or mean-reversion zones.

Key applications include:

• Trend Confirmation: Price holding above the AVWAP suggests a bullish trend originating from the anchor point.
• Volatility Analysis: The standard deviation bands (SD 1 through SD 8) expand and contract based on price variance relative to the average, highlighting periods of high volatility.
• Mean Reversion: Price reaching extreme SD bands (e.g., SD 3 or higher) may indicate an overbought or oversold condition relative to the anchor point.

Details

The script calculates the VWAP by accumulating the product of price (HLC3) and volume, divided by the total volume since the start time. Additionally, it calculates the variance and standard deviation of price relative to the mean starting from the same anchor point. This implementation allows for a more granular view of price distribution over time compared to standard rolling VWAP calculations.

Settings

Anchor Settings

• Start Year/Month/Day/Hour/Minute: Defines the exact timestamp where the VWAP calculation begins.

Display Settings

• Display Labels?: Toggles the visibility of the text labels on the right side of the chart.
• Add Anchor's Start Time to Label?: Appends the starting date/time to the indicator labels for easier reference.
• Label Offset Multiplier: Adjusts the horizontal spacing of the labels from the current price bar.

Style Settings

• AVWAP Color: Sets the color for the central VWAP line.
• Up Color: Sets the color for the positive standard deviation bands.
• Down Color: Sets the color for the negative standard deviation bands.

Multipliers

• Multiplier 1-8: These fields allow users to customize the width of each of the eight standard deviation bands.

FAQ

How do I choose the best anchor point for the indicator? The most effective anchor points are typically significant turning points in the market, such as swing highs, swing lows, or the start of a major earnings report or economic event.

Can I use this for intraday trading? Yes, by setting the anchor time to the market open or a specific intraday pivot, you can track volume-weighted price action for the current session.

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.