VWAP Candles & MVWAP

The VWAP Candles & MVWAP indicator provides a comprehensive visualization of volume-weighted price action by plotting VWAP-based candles alongside a Moving Volume Weighted Average Price (MVWAP) line. This tool allows traders to view price movements through the lens of volume distribution, offering a clearer perspective on market value and potential trend shifts compared to standard price candles.

Usage

The indicator can be used to identify trend direction and potential reversal points by analyzing the relationship between the VWAP candles and the MVWAP line.

• VWAP Candles: These candles represent the volume-weighted open, high, low, and close values over a specified period. They act as a "shadow" of current price, highlighting where the majority of trading activity is occurring relative to price extremes.
• Trend Identification: When VWAP candles consistently close above the MVWAP line, it suggests a bullish trend. Conversely, candles closing below the MVWAP line indicate bearish sentiment.
• Crossovers: A crossover between the VWAP candle close and the MVWAP line can serve as a signal for potential trend changes or entry/exit points.
• Resolution: Users can adjust the timeframe resolution to align the VWAP calculations with higher or lower periodicity, making it adaptable for both scalping and swing trading.

Details

The script constructs VWAP candles by calculating the cumulative sum of price (multiplied by volume) divided by the cumulative volume over a rolling "Volume Length" window. This process is applied individually to the open, high, low, and close prices.

The MVWAP (Moving Volume Weighted Average Price) is calculated by taking a Simple Moving Average (SMA) of the Typical Price VWAP over the "Moving Average Length." Additionally, the script includes a standard cumulative VWAP (referred to as "Old VWAP") that resets based on the chosen timeframe resolution, providing a benchmark for comparing modern rolling calculations with traditional anchored VWAP methods.

Settings

• Volume Length: Sets the lookback period for the cumulative sum used in the VWAP candle calculations (default is 5).
• Moving Average Length: Determines the length of the SMA applied to the Typical Price VWAP to create the MVWAP line.
• Source: Specifies the price input used for the MVWAP calculation (default is HLC3).
• Resolution: Adjusts the timeframe periodicity for the candles and the benchmark VWAP line.

FAQ

How do I interpret the VWAP candles compared to regular candles?

VWAP candles focus on where volume is concentrated. If a regular price candle has a long wick but the VWAP candle is small, it indicates that the price extreme occurred on very low volume and may not be a sustainable level.

What is the difference between MVWAP and the standard VWAP?

The standard VWAP is typically cumulative from the start of a session or timeframe, whereas the MVWAP in this script is a moving average of volume-weighted values, providing a smoother, more reactive line to recent volume trends.

How can I access VWAP Candles & MVWAP?

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