VWAP Bands wrap a VWAP line with one or more standard-deviation envelopes. The bands flag where price has stretched far from volume-weighted fair value.
Formula
vwap = VWAP rolling over `period` bars
sd = stddev of typical price over `period` bars
band_k = vwap +/- k * sd, for k in 1..num_bandsParams
period- window for VWAP + stddev. Required.- number of bands - how many standard-deviation envelopes to draw. Default 2.
Output
Multiple columns depending on number of bands:
{name}_vwap{name}_upper1,{name}_lower1{name}_upper2,{name}_lower2- (and so on)
Usage
- Mean reversion: fade touches of the outer bands back toward the VWAP line.
- Trend channels: in a strong trend, price often "walks" the inner band (upper for uptrends, lower for downtrends).
- Stop reference: bands give a volatility-adjusted level for stops or trailing exits.
Pitfalls
VWAP Bands inherit the VWAP Rolling gotchas: window choice matters, and zero-volume bars break the weight.