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I wanted to use the VWAP +/- 1 std dev band in Sierra Chart but the band seems too narrow. If you look at the image this was a balanced day where most of the data points should be included inside the +/- 1 std dev. This is the "Volume Weighted Average Price" study. As a reference I also included the "Volume by Price" study with a developing value area (green color), this study makes more sense and I would assume that the 1 std dev VWAP band be roughly similar.
Does anyone use the VWAP bands in Sierra Chart?
VWAP +/- 1 std dev should encompass about 70% of the data points am I correct?
Can you help answer these questions from other members on NexusFi?
The standard deviation of the VWAP is going to be much tighter than price because it is examining and describing the distribution of the VWAP summary statistic, not the distribution of the underlying price.
VWAP is the Supply/Demand intersection of equilibrium. In other words, it is fair price. Institutional traders are graded on their execution relative to VWAP. Your opportunity as a retail trader is to identify the discount zones (VWAP -1,-2,-3 std devs) and buy there. Your sell point is in liquidity at or above VWAP in premium liquidity, which is generated for you by the algorithmic nature of price-delivery.
These zones are easily identifiable on a candlestick chart.
