VWAP Stdev Bands v2 Mod
Jun 9, 2016
The VWAP Stdev Bands v2 Mod indicator provides a volume-weighted average price (VWAP) anchored to the daily session alongside multiple customizable standard deviation bands to identify overbought and oversold market conditions.
Usage
The Usage section describes how the script can be used, particularly for intraday trading strategies and mean reversion.
- Mean Reversion: Traders can use the outer standard deviation bands to identify potential reversal points. When price reaches the higher multiplier bands (e.g., Band 3 or 4), it may indicate an overextended market prone to returning to the VWAP baseline.
- Trend Confirmation: When price remains sustained between the VWAP and the first or second deviation bands, it often signals a healthy intraday trend.
- Range Trading: In sideways markets, the bands act as dynamic support and resistance levels, providing clear boundaries for price action.
- Previous Session Reference: The tool can display the closing VWAP value from the previous session, serving as a significant historical benchmark for the current day's price action.
Details
The VWAP Stdev Bands v2 Mod is a modified version of the original script by /u/SandroTurriate/ and @TheYangGuizi. This version introduces expanded visualization options, including up to five sets of standard deviation bands and background fills for better clarity.
The calculation is based on the cumulative sum of price (HL2) multiplied by volume, divided by the cumulative volume for the current trading day. The standard deviation is derived using the variance of the volume-weighted price. Unlike standard Bollinger Bands which use a simple moving average, these bands expand and contract based on both price volatility and volume intensity, making them more reactive to institutional activity.
Settings
- Stdev above (1-5): Defines the multiplier for the upper standard deviation bands.
- Stdev below (1-5): Defines the multiplier for the lower standard deviation bands.
- Show second/third/fourth/fifth group of bands?: Toggles the visibility of additional deviation levels to declutter the chart.
- Show previous VWAP close: Displays a horizontal reference line representing the final VWAP value from the prior session.
FAQ
How do I use the different band levels for trading? The inner bands (Level 1 and 2) are typically used for trend following, while the outer bands (Level 3, 4, and 5) are frequently used to identify extreme price exhaustion and potential reversal zones.
Can I use this indicator on daily or weekly timeframes? This script is specifically designed for intraday use as it resets its calculations at the start of every new daily session.
How do I get access to the VWAP Stdev Bands v2 Mod? You can get access on the LuxAlgo Library for charting platforms like TradingView, MetaTrader (MT4/MT5), and NinjaTrader for free.
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