Diupdate
VWAP Deviation Profile (Recio)
This indicator offers a new form of VWAP analysis and Volume Profile analysis, revealing price levels of high and low volume activity relative to VWAP on a periodic basis.
The VWAP Deviation Profile (VDP) is an original concept for analyzing price levels relative to VWAP. This indicator introduces a new way to analyze volume accumulation over a session and implements a novel method for ranking and categorizing volume nodes, allowing the indicator to display a full history of volume node development and progression.
Author Note: To those familiar, this concept is an extension of the "VWAP Balance Zones" (VBZ) concept. No prior knowledge of VBZ is required to understand this indicator, but it provides a good background for the formation of this idea. If this is your first time here, the next section will briefly fill you in.
> VWAP Balance Zones
"VWAP Balance Zones" is another original concept aimed at identifying the equilibrium (balance) area between market participants within the current trend by averaging the daily extremes and the daily VWAP. The idea was that the 50% area between daily extremes and daily VWAP could appeal to both buyers and sellers, thereby creating points of contention where we can watch for opportunities.
This methodology opened the door to the idea of analyzing price action relative to VWAP within the range of the day. In the first implementation of this concept, the VBZ indicator created zones which were exactly 50% between VWAP and the daily high and low. This indicator moves beyond the 50% level and analyzes all of price action relative to VWAP to determine the percentage levels where most volume actually occurred.
> A New Profile
The VWAP Deviation Profile uses relative price positioning in order to aggregate its profile. Instead of reading straight price levels, each point on the profile is relative to VWAP and the day's extremes. This creates a dynamic profile that transforms over time. Its values shift as time progresses due to the developing daily range and its two-scale system.
Unlike a typical volume profile, the VWAP Deviation Profile operates on two separate scales: from VWAP to the Day High, and from VWAP to the Day Low. When new highs or lows are made, the entire profile must adjust accordingly. For this reason, the density of the profile differs over and under VWAP, since price action is not typically symmetrical around VWAP.
Due to the nature of this analysis, some concepts from typical volume profile are considered relevant but others are thrown out entirely. The following sections describe the parts of the profile and how they differ from a typical volume profile.
> Historical Node Analysis
Due to the improved node detection algorithm, VDP is able to display a full history of Volume Nodes and Split Values, allowing users to study the behaviors and interactions of this indicator historically.
Volume nodes and Split values are displayed as plots, which live in the chart history permanently. At the end of each day, an end-of-day (EOD) profile is drawn into history as well.
Since the profile changes as it develops over time, the nodes are constantly shifting. For example, a place where an LVN has formed does not remain an LVN if price starts interacting with it, this point will naturally shift or disappear.
> Historical Update Frequency
For additional efficiency, the script implements a historical update frequency, which only calculates historical values at the selected interval. This speeds up calculations and does not affect the accuracy of the live profile. The historical update frequency can be set all the way down to 1, to produce a full calculation, perfectly replicating the calculations as if they were live. This comes at the expense of slower processing times. By default the historical update frequency is set to 10, this provides a good balance of responsiveness and accurate information.
This behavior ONLY affects historically calculated data. When watching a live chart, the live values are calculated and solidified in history as the chart develops. These live-calculated values remain on the chart until the chart refreshes.
Below is a comparison between the default frequency of 10 bars and the highest-granularity setting of 1 bar.
> Ranking Nodes
After volume nodes are detected, they are ranked from highest to lowest, or lowest to highest depending on settings. This creates the ability to study up to 10 ranks of nodes on the profile in any order.
Volume nodes are not ranked based on volume alone, but the surrounding volume structure is taken into account. For this reason some nodes may appear as if the order is wrong. This is an intentional behavior to give priority to nodes with more "mass" surrounding them.
In the chart below, the nodes are set to show the 3 highest HVNs. So 1 should be the highest volume, and 3 should be the lowest. However, we see an outlier situation where the 2nd-ranked HVN appears to contain less volume than the 3rd-ranked HVN. Due to the surrounding mass of the volume structures, the 2nd is regarded as more important than the 3rd, since the mass of the surrounding area is greater overall.
> Adaptive Thinking
At the beginning of the day, the profile starts with only one bar of data. As the day progresses so does the profile; the extremes develop and so does VWAP. What was 100% then is not 100% now, and the 0% baseline (VWAP) has changed in value.
Due to this, it can be confusing to figure out how the profile is determining its values and where the data is coming from on the chart.
"Traces" were made to help understand this dynamic by visualizing the profile's row values throughout time. These traces point to the exact price interactions which led to the present data.
In the chart below, the Highest HVN, Lowest LVN, and Volume Split are traced back to the start of the session.
IMPORTANT NOTE: Visualizing traces this way will only help in understanding how the profile works. Traces being used in this manner present a look-ahead bias. They will appear artificially "good" due to the future information known by the user when setting the trace levels at the current node values.
After looking at this, we can see that the highest volume deviation of the day was created from breakouts and expansion of the daily high. Additionally, we can see the areas where price crossed our lowest volume deviation, with little time (and volume) spent chopping through it.
One way to implement traces into a live analysis is by marking the percent deviations from the previous day and tracking them into the current session. Traces do not change based on volume and stay at a fixed deviation percent.
> Settings
> Application
The goal of this indicator is to offer a new means of analysis. This analysis may be most helpful to traders who study Auction Market Theory, or are familiar with VWAP and volume profiles. The analysis is not locked to a specific market or timeframe, although you will be limited based on the anchor timeframe selected.
Here are a few special behaviors which were observed during development:
> Final Notes
Thank you for reading!
Because this is a new form of analysis, there is not one "correct" way to implement it, as it is still in its infancy. We are only able to take concepts from other established methods and use what we know to shape our understanding and interpretation of this new indicator. The goal of my examples is to demonstrate the behaviors of this indicator and hopefully spark ideas on how it could be utilized in your own trading systems.
That's it.
The VWAP Deviation Profile (VDP) is an original concept for analyzing price levels relative to VWAP. This indicator introduces a new way to analyze volume accumulation over a session and implements a novel method for ranking and categorizing volume nodes, allowing the indicator to display a full history of volume node development and progression.
Author Note: To those familiar, this concept is an extension of the "VWAP Balance Zones" (VBZ) concept. No prior knowledge of VBZ is required to understand this indicator, but it provides a good background for the formation of this idea. If this is your first time here, the next section will briefly fill you in.
> VWAP Balance Zones
"VWAP Balance Zones" is another original concept aimed at identifying the equilibrium (balance) area between market participants within the current trend by averaging the daily extremes and the daily VWAP. The idea was that the 50% area between daily extremes and daily VWAP could appeal to both buyers and sellers, thereby creating points of contention where we can watch for opportunities.
This methodology opened the door to the idea of analyzing price action relative to VWAP within the range of the day. In the first implementation of this concept, the VBZ indicator created zones which were exactly 50% between VWAP and the daily high and low. This indicator moves beyond the 50% level and analyzes all of price action relative to VWAP to determine the percentage levels where most volume actually occurred.
> A New Profile
The VWAP Deviation Profile uses relative price positioning in order to aggregate its profile. Instead of reading straight price levels, each point on the profile is relative to VWAP and the day's extremes. This creates a dynamic profile that transforms over time. Its values shift as time progresses due to the developing daily range and its two-scale system.
Unlike a typical volume profile, the VWAP Deviation Profile operates on two separate scales: from VWAP to the Day High, and from VWAP to the Day Low. When new highs or lows are made, the entire profile must adjust accordingly. For this reason, the density of the profile differs over and under VWAP, since price action is not typically symmetrical around VWAP.
Due to the nature of this analysis, some concepts from typical volume profile are considered relevant but others are thrown out entirely. The following sections describe the parts of the profile and how they differ from a typical volume profile.
>> Range & Rows
The range of the VWAP deviation profile is the same as a traditional volume profile. The profile displays horizontal rows spanning the entire price range. Unlike a normal volume profile, each VDP row represents a one-percent deviation from VWAP to the relative extreme. The session high represents a +100% deviation, while the session low represents a -100% deviation. VWAP is 0% deviation, since this is the value we are measuring deviations from.
>> Volume Nodes
Volume nodes are the peaks and valleys in a volume profile representing areas of high volume and low volume relative to the surrounding areas of volume. This indicator uses a new algorithm for identifying these points, different from my previous node detection algorithms. This new method is significantly more efficient, which creates opportunities for additional analysis of these points.
Reading volume nodes in this indicator is similar to a typical volume profile. However, it is important to remember that all row values are percentage deviation values from VWAP.
- High Volume Nodes: These are areas where significant volume has occurred, often due to spending a lot of time at these levels. With VWAP deviations in mind, these high volume areas show us exactly which deviations of VWAP have been interacted with the most over time. High volume areas can be considered contested areas, with sellers finding value above and buyers finding value below. This dynamic creates chop and consolidation which results in increased time spent at these areas.
- Low Volume Nodes: These are VWAP deviations where price has spent the least amount of time (and little volume). These low volume areas display the negative space between high volume areas. Low volume areas are often transitory, with bounces occurring on the edges or strong continuation through.
>> NO POC
In a volume profile, the Point of Control (POC) is the single row in the profile where the most volume occurred. VDP implements "Ranked Volume Nodes", which identifies and orders all volume nodes from highest to lowest and vice versa, up to 10 ranks of nodes of each type (HVN/LVN).
A single row on the profile still contains the most accumulated volume. However, to avoid confusion, the term "POC" is avoided here since this point does not represent the same information as a traditional volume profile analysis.
>> NO Value Area
In a volume profile, Value Area is typically the area surrounding the POC which contains 70% of the profile's total volume, representing the area where most transactions occurred. This does not exist in VDP.
This is replaced with a metric I've called the "Volume Split".
The Volume Split is the profile row at which 50% of the profile's total volume has occurred above and 50% has occurred below. This point can serve as a bias gauge and an indication of market state. A Split around VWAP suggests a better balanced market, while a disproportionate Split shows a clear imbalance. In addition to general bias, due to the underlying nature of this metric, activity is often witnessed around the Split level consistent with other levels of importance.
This concludes the comparison between VDP and a traditional VP.
> Historical Node Analysis
Due to the improved node detection algorithm, VDP is able to display a full history of Volume Nodes and Split Values, allowing users to study the behaviors and interactions of this indicator historically.
Volume nodes and Split values are displayed as plots, which live in the chart history permanently. At the end of each day, an end-of-day (EOD) profile is drawn into history as well.
Since the profile changes as it develops over time, the nodes are constantly shifting. For example, a place where an LVN has formed does not remain an LVN if price starts interacting with it, this point will naturally shift or disappear.
> Historical Update Frequency
For additional efficiency, the script implements a historical update frequency, which only calculates historical values at the selected interval. This speeds up calculations and does not affect the accuracy of the live profile. The historical update frequency can be set all the way down to 1, to produce a full calculation, perfectly replicating the calculations as if they were live. This comes at the expense of slower processing times. By default the historical update frequency is set to 10, this provides a good balance of responsiveness and accurate information.
This behavior ONLY affects historically calculated data. When watching a live chart, the live values are calculated and solidified in history as the chart develops. These live-calculated values remain on the chart until the chart refreshes.
Below is a comparison between the default frequency of 10 bars and the highest-granularity setting of 1 bar.
> Ranking Nodes
After volume nodes are detected, they are ranked from highest to lowest, or lowest to highest depending on settings. This creates the ability to study up to 10 ranks of nodes on the profile in any order.
Volume nodes are not ranked based on volume alone, but the surrounding volume structure is taken into account. For this reason some nodes may appear as if the order is wrong. This is an intentional behavior to give priority to nodes with more "mass" surrounding them.
In the chart below, the nodes are set to show the 3 highest HVNs. So 1 should be the highest volume, and 3 should be the lowest. However, we see an outlier situation where the 2nd-ranked HVN appears to contain less volume than the 3rd-ranked HVN. Due to the surrounding mass of the volume structures, the 2nd is regarded as more important than the 3rd, since the mass of the surrounding area is greater overall.
> Adaptive Thinking
At the beginning of the day, the profile starts with only one bar of data. As the day progresses so does the profile; the extremes develop and so does VWAP. What was 100% then is not 100% now, and the 0% baseline (VWAP) has changed in value.
Due to this, it can be confusing to figure out how the profile is determining its values and where the data is coming from on the chart.
"Traces" were made to help understand this dynamic by visualizing the profile's row values throughout time. These traces point to the exact price interactions which led to the present data.
In the chart below, the Highest HVN, Lowest LVN, and Volume Split are traced back to the start of the session.
IMPORTANT NOTE: Visualizing traces this way will only help in understanding how the profile works. Traces being used in this manner present a look-ahead bias. They will appear artificially "good" due to the future information known by the user when setting the trace levels at the current node values.
After looking at this, we can see that the highest volume deviation of the day was created from breakouts and expansion of the daily high. Additionally, we can see the areas where price crossed our lowest volume deviation, with little time (and volume) spent chopping through it.
One way to implement traces into a live analysis is by marking the percent deviations from the previous day and tracking them into the current session. Traces do not change based on volume and stay at a fixed deviation percent.
> Settings
- Anchor Timeframe:
The VWAP/Profile anchor timeframe can be changed to any custom timeframe to suit your needs. By default the anchor profile is set to "1 day" so the terms "Day" and "Daily" used thus far in the description can be understood as referring to the custom timeframe, session, or period you choose.
Below is a chart showing a 1-Week anchored profile. - Node Sensitivity:
The node sensitivity setting can be tuned to match the desired level of nodes that get identified. A lower sensitivity will identify nodes more conservatively, only pointing out nodes which are more pronounced. A higher sensitivity will identify nodes more aggressively, often pointing out smaller less-pronounced nodes in addition to the obvious nodes.
This setting can be tuned from 1 to 10. The default is 7, which was the preferred setting during development. More or less sensitivity may be needed based on your market and application.
Increasing the sensitivity does not compromise the integrity of the identification for larger nodes, it only (as the name suggests) increases the sensitivity to minor fluctuations in the topography of the profile.
In the chart below, we have set the nodes to display their max number of ranks (up to 10 nodes). When sensitivity is at 1, only 2 HVNs are identified. When set to 7 (default), 5 HVNs were identified from the same profile. - Other Node Settings:
- Node Display Number: Choose the MAX number of nodes that can be displayed at one time. The specific number displayed is dependent on the number of nodes detected. If the display number is set to 10, but only 2 nodes are detected, only 2 nodes will display.
- Node Order: Set the ranking order of the displayed nodes. Choose to display the [X] highest or lowest of each node type. Want to see the 2 Lowest HVNs? Go ahead!
The chart below shows the 3 lowest HVNs and 3 highest LVNs.
- Display Settings:
The profile's location can be configured relative to the current bar on your chart through two settings.- Display Size: This sets the max width of the profile. The row with the highest volume will be this many bars wide. This setting can be negative to display the profile as left-facing. To distinguish historical profiles from live, the inverse of this value is used for casting historical profiles.
- Display Offset: This changes the axis bar, 0 = current live bar. This value can be set to negative values to move the axis left, or positive values to move the axis right.
- Manual Traces:
Up to 4 traces can be set, these values can be set anywhere from -100 to +100. These are aligned with the profile's deviation percentages with -100 being the Day Low, 0 being VWAP, and +100 being the Day High.
To find the percentage value of a point on the profile, hover over the labels at the end of the profile rows to get a readout of the exact percent deviation they represent. - Runtime Modifications:
- Historical Update Frequency: As touched on in its own section, this changes the frequency at which the historically calculated indicator values are updated. The default 10 has been found as sufficiently detailed and quick, yet the value can be decreased for higher detail or increased for higher speed.
- Live Profile Only: If desired, all historical visuals can be turned off, leaving only the live profile on your display. This offers a minimalist display, while retaining all indicator levels.
> Application
The goal of this indicator is to offer a new means of analysis. This analysis may be most helpful to traders who study Auction Market Theory, or are familiar with VWAP and volume profiles. The analysis is not locked to a specific market or timeframe, although you will be limited based on the anchor timeframe selected.
Here are a few special behaviors which were observed during development:
- Trend:
On days where price is trending, the entire profile skews to one side. This is due to the disproportionate amount of volume which occurred (for most of the day) on one side of VWAP with relatively little volume on the opposite side.
In the example below, the morning reversal turned into trend which flattened out later in the day. For most of the day, VWAP was essentially playing catch-up, while the Volume Split tracked at a more relevant level. - Volume Accumulation in Trend:
In an uptrend, volume accumulation is witnessed at various percent levels just under the Day High. In the chart example above, the session's trend caused an HVN to develop at 94%.
While price is breaking the highs, every candle does not sit perfectly at the daily high for the entire trend. Between the candle highs and lows as well as fluctuations, accumulation is witnessed just below the highs. The area between the high and the closest HVN is revealing for how tight the trend is, where to expect retracements and when to suspect reversals. - Node Relevance:
Volume nodes formed earlier in the session often retain relevance when revisited later in the session.
The example below shows multiple interactions with HVNs and LVNs throughout the day which were established far in advance, giving ample opportunity to anticipate interactions later on. - Volume Distribution:
VWAP tells us (as its name implies) the price level average relative to volume. However, VDP tracks how volume accumulated at price deviations above and below VWAP.
In the chart example above, price spent about double the amount of time above VWAP vs below VWAP, yet due to the volume figures and price deviations from VWAP, the Split ended the day only at +22%.
From the price action and time spent above VWAP, we could assume a bullish bias with more continuation. However, when looking at the Volume Split, we notice that it is still relatively close to VWAP, telling us that volume has not significantly accumulated at higher deviations away from VWAP. With this in mind a more cautious approach may be better.
The chart below shows the following day from the previous example and illustrates why a more cautious approach may have been appropriate.
> Final Notes
Thank you for reading!
Because this is a new form of analysis, there is not one "correct" way to implement it, as it is still in its infancy. We are only able to take concepts from other established methods and use what we know to shape our understanding and interpretation of this new indicator. The goal of my examples is to demonstrate the behaviors of this indicator and hopefully spark ideas on how it could be utilized in your own trading systems.
That's it.
Catatan Rilis
The script is now included in my Paid Space!Catatan Rilis
UpdateMade some backend refinements to node detection to make them more consistent near extreme values.
Tersedia di Paid Space
Indikator ini hanya tersedia untuk pelanggan Paid Indicators. Bergabunglah untuk mengakses skrip ini dan skrip lainnya dari SamRecio.
Paid Indicators:
tradingview.com/spaces/SamRecio/
tradingview.com/spaces/SamRecio/
Pernyataan Penyangkalan
Informasi dan publikasi ini tidak dimaksudkan, dan bukan merupakan, saran atau rekomendasi keuangan, investasi, trading, atau jenis lainnya yang diberikan atau didukung oleh TradingView. Baca selengkapnya di Ketentuan Penggunaan.
Tersedia di Paid Space
Indikator ini hanya tersedia untuk pelanggan Paid Indicators. Bergabunglah untuk mengakses skrip ini dan skrip lainnya dari SamRecio.
Paid Indicators:
tradingview.com/spaces/SamRecio/
tradingview.com/spaces/SamRecio/
Pernyataan Penyangkalan
Informasi dan publikasi ini tidak dimaksudkan, dan bukan merupakan, saran atau rekomendasi keuangan, investasi, trading, atau jenis lainnya yang diberikan atau didukung oleh TradingView. Baca selengkapnya di Ketentuan Penggunaan.