Intraday VWAP Z-Score for Detecting Price Extremes

Summary

The indicator measures how far the current close sits above or below the intraday volume-weighted average price, expressed in units of a calculated standard deviation. VWAP resets each trading day. Once a minimum number of bars has elapsed, the standard-deviation estimate uses the day’s observed bar ranges relative to VWAP; the default minimum is 100 bars. An optional smoothing setting averages the resulting score, and the display marks readings at or beyond positive or negative two as potential overbought or oversold zones.

The intended use is to identify unusually extended intraday prices that might revert toward VWAP. That is a mean-reversion hypothesis, not evidence that a reversal will occur. The document provides an indicator formula and settings but no tested markets, backtest, or trading rules for entries, exits, or risk. Its estimate depends on the intraday sample available and uses bar highs and lows in its dispersion calculation, so users should assess how the measure behaves across instruments, bar intervals, and session conditions before relying on the thresholds.

Key ideas

• The score expresses the close’s distance from that day’s VWAP in standard-deviation units.
• VWAP resets each day, and the default minimum period for the dispersion calculation is 100 bars.
• Readings at or beyond positive or negative two are highlighted as possible overbought or oversold conditions.
• The proposed interpretation is a possible return toward VWAP, not a guaranteed reversal.
• The document gives an indicator formula but no trading rules or performance evaluation.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.