The volume weighted average price indicator is a line study indicator that shows in the main chart window of MT5. The indicator monitors the typical price and then trading volume is used to automatically push the indicator line toward heavily traded prices. These prices are where the most contracts (or lots) have been traded. Then those weighted prices are averaged over a look back period, and the indicator shows the line study at those pushed prices.
The indicator in this post allows the trader to set the daily start time of that look back period. For traders who are new MT5 users, the open time of each bar on a chart can be viewed by simply rolling over each bar with the mouse pointer.
This indicator is intended for intraday trading only.
This indicator allows you to anchor the start of the VWAP and bands to the most recent major high or low, even when that high or low appears in your chart several days ago. This is how institutional traders and liquidity providers often trade markets with the VWAP.
This indicator also shows 6 standard deviation bands, similarly to the way that a Bollinger Bands indicator shows such bands. The trader is able to set 3 individual standard deviation multiplier values above the volume weighted average price line study, and 3 individual standard deviation multiplier values below the volume weighted average price line study. Higher multiplier values will generate rapidly expanding standard deviation bands because again, the indicator is cumulative.
Daily price compression levels are also built into this indicator. Each price compression level appears at the price level where price has been most confined to a narrow range within each respective day. The number of days in history to analyze for compression levels is set in the DaysBackCL input. All compression levels are automatically extended forward in time to the currently forming bar on the chart.
Price labels for all lines and levels are also built into this indicator and appear just to the right of the currently forming bar on the chart. Price labels can be turned on and off using the ShowVWAPandSDlabels and the ShowCompressionLevelsLabel inputs.
The indicator settings can be changed by the trader in the indicator Inputs tab and in the indicator Colors tab as pictured above.
Just to clarify, popular standard deviation bands settings are:
1.618, 3.236, and 4.854; or
1.000, 2.000, and 3.000; or
1.250, 1.500, and 2.000.
Examples of usage *:
In a ranging (sideways) market, enter a trade at the extremes of the standard deviation bands (SD3) and exit when price returns to the VWAP line study.
Optionally, spread out the trade. For example, sell 3 contracts (or lots, mini lots, micro lots, etc.) at SD1Pos, sell 2 at SD2Pos, and sell 3 at SD3Pos. Exit at VWAP. Do reverse for buy. (Roll cursor over standard deviation bands to see SD1Pos, SD1Neg, etc. labels); or
Trade between SD1Pos and SD1 Neg, alternately buying and selling from one standard deviation line to the other.
In a trending (rising or falling) market, enter a buy when a price bar opens above the VWAP line study, and exit at the nearest standard deviation band above (SD1Pos).
Optionally, repeat the same trade but substitute SD1Pos for the VWAP, and SD2Pos for SD1. Reverse for sell; or
Trade all lines (VWAP, SD1Pos, SD2Pos, and SD3Pos) in the same way. Again, reverse for sell.
Compression levels act as immediate centers of gravity (or "magnets") for price to interact with.
Look for confluence of the VWAP and any compression level. These are levels where price can become supercharged before breaking out; or
Look for any compression level that is between 2 standard deviation bands and scalp back to the compression level while price continues to respect the compression level.
Enter in the direction of the compression level at a standard deviation band;
Exit when price returns to the compression level.
* The above trading conditions are not exhaustive. 7 lines provide many creative ways to trade.
Indicator lines (indicator buffers) can be called with iCustom in Expert Advisors created by Expert Advisor builder software or custom coded Expert Advisors:
No empty values;
No repainting; and
No DLL's.
The price for this software item is a 1 year rental fee. Each software license is valid for one trader only. After paying, you must use the Contact form on this website to send your full name as shown on your trading account. Use the Contact form on the top menu of this website. Then you will promptly receive your activated ex5 file in your email.
