OPEN-SOURCE SCRIPT
VWAP Strategy with Risk Management
1. Strategy Components
1.1. VWAP (Volume-Weighted Average Price)
Definition: VWAP is a trading indicator that provides the average price of an asset based on both price and volume.
Purpose in Strategy:
It serves as a dynamic support/resistance level.
The price crossing above VWAP signals potential bullish momentum (long entry).
The price crossing below VWAP signals potential bearish momentum (short entry).
Calculation:
Typical Price =
(
𝐻
𝑖
𝑔
ℎ
+
𝐿
𝑜
𝑤
+
𝐶
𝑙
𝑜
𝑠
𝑒
)
/
3
(High+Low+Close)/3
VWAP =
Sum(Typical Price × Volume)
Sum(Volume)
Sum(Volume)
Sum(Typical Price × Volume)
over the defined rolling period.
1.2. Trend Filter
Indicator: A 50-period Exponential Moving Average (EMA) is used to identify the larger trend.
In Uptrend: The price is above the EMA.
In Downtrend: The price is below the EMA.
Purpose in Strategy:
It ensures trades are aligned with the broader trend, reducing false signals.
Only long trades are allowed in an uptrend, and only short trades are allowed in a downtrend.
1.1. VWAP (Volume-Weighted Average Price)
Definition: VWAP is a trading indicator that provides the average price of an asset based on both price and volume.
Purpose in Strategy:
It serves as a dynamic support/resistance level.
The price crossing above VWAP signals potential bullish momentum (long entry).
The price crossing below VWAP signals potential bearish momentum (short entry).
Calculation:
Typical Price =
(
𝐻
𝑖
𝑔
ℎ
+
𝐿
𝑜
𝑤
+
𝐶
𝑙
𝑜
𝑠
𝑒
)
/
3
(High+Low+Close)/3
VWAP =
Sum(Typical Price × Volume)
Sum(Volume)
Sum(Volume)
Sum(Typical Price × Volume)
over the defined rolling period.
1.2. Trend Filter
Indicator: A 50-period Exponential Moving Average (EMA) is used to identify the larger trend.
In Uptrend: The price is above the EMA.
In Downtrend: The price is below the EMA.
Purpose in Strategy:
It ensures trades are aligned with the broader trend, reducing false signals.
Only long trades are allowed in an uptrend, and only short trades are allowed in a downtrend.
Open-source script
In true TradingView spirit, the author of this script has published it open-source, so traders can understand and verify it. Cheers to the author! You may use it for free, but reuse of this code in publication is governed by House rules. You can favorite it to use it on a chart.
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