VWAP (Volume Weighted Average Price) is one of the most important and true price indicators. It shows how would the price chart looked like if each trade's volume would be considered.
In addition it plots one, two, or three standard deviation areas with custom multipliers for your convinience. These areas show the price channel: sometimes price bounces off the deviation lines almost exactly.
Institutional traders often evaluate performance by comparing the average price they get with End of Day VWAP value.
- Various typical price calculation methods: OHLC/4 HLCC/4, HLC/3
- Optionally display VWAP moving average: MVWAP
- VWAP changes color to red/green when the price crosses it below/above. All colors and plots are adjustable.
- Set up to 3 standard deviation areas with custom colors and opacity
How to use
One of the best methods to trade with VWAP is this:
- When price is above VWAP, it means that instrument is overbought. Wait until the price gets lower to VWAP and buy when it crosses VWAP back above.
- When price is below VWAP, it means that instrument is oversold. Wait until the price gets higher to VWAP and sell when it crosses VWAP back below.
This price is considered as a good price by market makers and they also buy/sell at those levels.