VWAP-RSI

The VWAP-RSI indicator is a hybrid oscillator that combines the Volume Weighted Average Price (VWAP) with the Relative Strength Index (RSI) to provide a multi-layered perspective on market momentum and trend direction. By applying RSI calculations to various smoothed lengths of the VWAP, this tool helps traders identify overbought/oversold conditions while filtering noise through volume-weighted data.

Usage

The indicator can be used to identify potential trend reversals and momentum shifts across different time horizons simultaneously. It displays five distinct RSI lines derived from different VWAP smoothing lengths:

• Bullish Momentum: Lines turn green when the underlying smoothed VWAP is increasing.
• Bearish Momentum: Lines turn red when the underlying smoothed VWAP is decreasing.
• Overbought/Oversold: The indicator includes horizontal levels at 80 and 20. When the RSI lines cross above 80, the asset may be overextended to the upside; when they cross below 20, it may be overextended to the downside.
• Convergence/Divergence: Traders can look for instances where all five lines converge to confirm a strong trend or diverge to indicate a potential loss in momentum.

Details

The VWAP-RSI calculates five different versions of a weighted moving average (WMA) applied specifically to the standard VWAP. The smoothing lengths are square-rooted to create a unique response curve. The Relative Strength Index (RSI) is then calculated based on these smoothed VWAP values rather than standard price data. This ensures that the momentum being measured accounts for both price action and volume distribution.

Settings

• Length 1 - 5: Adjusts the smoothing periods used for the five different VWAP components. Lower values are more reactive to recent price changes, while higher values provide a smoother trend.
• Length of RSI: Determines the lookback period for the RSI calculation applied to the smoothed VWAP values.

FAQ

How do I interpret the colors of the lines?

The colors are determined by the slope of the smoothed VWAP. Green indicates the value is higher than the previous bar (bullish), and red indicates it is lower (bearish).

Can I use this for intraday trading?

Yes, because the indicator relies on VWAP, it is particularly effective for intraday analysis where volume-weighted data is most relevant.

How can I access VWAP-RSI?

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