What it does
The volume-weighted average price (VWAP) is the average price traded during a session, weighted by volume. This indicator calculates a daily or weekly VWAP that resets at the start of each period and draws bands at 1, 2 and 3 standard deviations around it. The bands show how stretched price is relative to the session's average.
Spot forex has no central exchange, so most brokers only provide tick volume (the number of price updates). The indicator uses real volume when the broker supplies it and falls back to tick volume when real volume is zero.
How it works
For every bar the typical price is (high + low + close) / 3 and the volume v is the real volume, or tick volume if real volume is zero.
- From the first bar of the day (or week) the indicator keeps running sums of typical price x v, v, and typical price squared x v.
- VWAP = sum(typical price x v) / sum(v).
- Variance = sum(typical price squared x v) / sum(v) - VWAP squared; the standard deviation is its square root.
- Bands = VWAP plus or minus 1, 2 and 3 standard deviations (configurable).
- Days are calendar days in broker server time. Weeks start on Sunday so that a Sunday open belongs to the new week.
Each bar only adds to the previous bar's sums, so the calculation is incremental and fast.
How to use it
Intraday traders often treat VWAP as a fair-value line: price holding above it suggests buyers have been in control during the session, below it suggests sellers. The bands help frame extremes. Moves to the second or third band are statistically stretched and are a common area to look for mean-reversion setups, while repeated closes outside the first band can signal a trending day.
It suits liquid symbols on M1 to H1 charts, especially during the main forex trading sessions. Check the Forex Market Hours tool to know when your broker's day starts.
Settings
| Input | Default | What it changes |
|---|---|---|
| Reset period | Daily | Daily or weekly anchoring |
| Band 1 / 2 / 3 | 1.0 / 2.0 / 3.0 | Distance of each band pair in standard deviations |
| Show band 1 / 2 / 3 | true | Hide any band pair you do not need |
| Alert band | 2 | Band whose closed-bar crossing triggers an alert |
| Popup alert / Push notification | false | Alerts once per bar |
Limitations
- Tick volume is only a proxy for traded volume and differs between brokers.
- Early in the period the VWAP and bands are based on few bars and move a lot; the bands start at zero width.
- The reset follows broker server time, which may not match the session you care about.
- The live bar's values change until the bar closes, as with any running average.