NEXT Regressive VWAP

2 nov 2021

Overview:

This version of the Volume-Weighted Average Price (VWAP) indicator features an extended algorithm, which, in addition to volume and price, also incorporates regression analysis. The result is a more responsive, often leading VWAP slope with a degree of statistical predictability built in. Just like with the original VWAP, NEXT Regressive VWAP offers two optional Standard Deviation bands that parallel it. These can be set to any deviation level, with the default being 1 and -1, indicating one standard deviation above and one below Regressive VWAP, respectively.

Below is a screenshot comparing NEXT Regressive VWAP (green) to the original VWAP (blue) on ES1! M3 chart.



Application and Strategy Ideas:

Price above NEXT Regressive VWAP is interpreted to have a bullish bias, and below, bearish. You can use TradingView's native Set Alert functionality to be notified, in real-time, when price crosses Regressive VWAP, and/or any of its standard deviation bands. Another popular "probability play" strategy is to scalp price when it crosses under the upper band (short) and crosses over the lower band (long). The screenshot below visualizes such a strategy on QQQ M1 chart:




Input Parameters:

There are 3 groups of input.

Regression Settings

Length - controls the length of time (in bars) for regression analysis with higher values yielding smoother, more responsive values.

Regression Weighting - controls the degree of regression analysis incorporated into VWAP, with 5 being average, 0-4 less, 6-10 more. The higher the value, the more responsive the Regressive VWAP curve.

VWAP Settings

Anchor Period - controls the origin of VWAP calculations, start of session being the default.

Source - data used for calculating the VWAP, typically HLC/3, but can be used with other price formats and data sources as well.

Offset - shifting of the VWAP line forward (+) or backward (-).

Standard Deviation Bands Settings

Calculate Bands - checking this will add 2 bands, each equidistant (by the amount of Multiplier) from the NEXT Regressive VWAP line.

Bands Multiplier - standard deviation multiplier, with 1 being the default

Signals and Alerts:

Here is how to set price (close) crossing NEXT Regressive VWAP alerts: open a chart, attach NEXT Regressive VWAP, and right-click on chart -> Add Alert. Condition: Symbol e.g. ES (close) >> Crossing >> Regressive VWAP >> VWAP >> Once Per Bar Close.