That is an interesting idea. You did not specify which high and low, but I guess that you want to take the high and low of the same session the VWAP relates to.
If you add such bands they will move up and down
- when the VWAP moves up or down
- whenever there is an expansion of the current day's range
If price tries to catch them they will widen, but price may catch up with them, similar to Bollinger Bands. In the end of the session the bands will be wider than in the beginning. How do you trade these bands?
hi yes sorry it will be high - low of current price.
I have used SD with some success and truthfully this is based on a strategy i have started following elsewhere based on comments a very successful vwap trader, i can post some links if that is allowed (not sure) but summary below.
He refers to it as MPD or maximum permissible deviation, not a moving average but a form of risk management.
"These bands also cater for cyclic oscillation of stocks intra day as the bands widen on both ends ..
The bands are symmetrical around VWAP at all times and not just at the point of reversals."
Just keen to check out how stocks interact against this figure compared to the more traditional SD bands.
I have been reading a thread on traderslab about vwap and SD and it is interesting. I'm not done going over all the material so i can't say for sure, but they talk about market statistics and use the SD as a point to take profits and counter trend trades as well as stop loss levels, they look at these in relation to peak Volume Price.
thats right, i believe in laymans terms SD is the average of the average. To give you expectations on an instruments typical movement.
As a follow on to SD my previous comments were about the MPD ie the max permissible deviation, if you look at the calculation it is like an addendum to SD as it takes VWAP into account which is a very important benchmark.
So probability of an instrument breaking out of its upper MPD is very low and any long trades taken at upper MPD is much higher risk.
The anaCurrentDayVWAP will only plot the VWAP for the current day, as indicated by its name. A VWAP basically is an anchored moving average, which calculates the volume-weighted average price between the anchor point and the time for which it is displayed.
The indicator has the following options:
ETH: The anchor point is the start of the night session.
RTH: The anchor point is the start of the selected intra-day session.
If you use a session template with three intra-day sessions, the VWAP will be plotted for the third session only.
Example: For 6E I use the following session template (which does not reflect official times but fits my needs):
Asian session : 56:00 PM EST - 2:00 AM EST (first session)
European session: 2:00 AM EST - 8:20 EST (second session)
US session: 8:20 AM EST - 5:00 PM EST (third session)
Now, if I select RTH and the third session, the VWAP will be calculated from the start of the third session as an anchor point. Chart attached.