Price Action (VWAP)
The Price Action (VWAP) algorithm determines trend direction with calculations based on the Volume Weighted Average Price technical indicator.
Volume-Weighted Average Price (VWAP)
VWAP calculates the average price of an asset, weighted by volume. It is the total dollar value of trading divided by the total trading volume for a specific time frame.
VWAP can be used for:
Support and Resistance - VWAP can act as a dynamic level of support or resistance. If an asset is trading above its VWAP, it's considered bullish, whereas trading below is bearish.
Trade Execution - Traders may execute buy orders when the price is below VWAP or sell orders when above, anticipating a return to the average price.
Trend Assessment - when price is consistently above or below VWAP can indicate bullish or bearish sentiment, respectively.
Benchmarking - Institutional traders and algorithms often use VWAP to assess the market value of their trades. Buy orders below VWAP or sell orders above, are considered favorable.
VWAP Visualizer
To view the VWAP line on the chart, activate Display VWAP line in the Visualizations section.
Price Action (VWAP) Settings
VWAP Source
Sets the source used to calculate the VWAP:
Open - open price
High - highest price
Low - lowest price
Close - closing price
Hl2 - average of high + low price (H+L/2)
Hlc3 - average of high + low + close price (H+L+C/3)
Ohlc4 - average of open + high + low + close price (O+H+L+C/4)
Hlcc4 - average of high + low + double-weighted close (H+L+C+C/4)
Elements of other loaded indicators can also be set as a Source. This allows the use of Lendal Visualizers as Confluence factors.
Periods
Sets the number of lookback periods used to calculate VWAP.
Smoothing
Sets the amount of smoothing applied to VWAP calculations. Increasing this number will make VWAP less sensitive to volatility within a candle.
Change Slippage %
Specifies the percentage price change from baseline required to trigger a trend change. Increasing this value will decrease the frequency of trend changes in volatile conditions.
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