The Weekly VWAP Calculation

The Weekly VWAP for NT8

In this Indicator Spotlight, we’re looking at the Current Week VWAP. Many are already familiar with the Current Day VWAP, available from our indicator library or the Order Flow VWAP that comes with NinjaTrader 8. The Weekly VWAP calculation is a nice supplement because it allows you to review trend and overbought/-sold information in a higher timeframe.  To learn more, watch the video or continue reading below.

The Anchored VWAP Calculation

The Current Week VWAP plots the volume weighted arithmetical mean of all transactions that take place during the weekly session. It is found by adding the prices for every transaction during the week divided by the total number of contracts traded during that time. Accordingly, the Current Week VWAP is anchored at the first day of the week.  Therefore on Mondays, the Current Week VWAP displays the same information as the Current Day VWAP for that day. While the Current Day VWAP resets on Tuesday morning, the Current Week VWAP continues to accumulate transactions.

The Institutional Perspective

On a daily and weekly basis, the VWAP is used to control execution cost. For one, institutional traders do not want to move the markets as they enter large positions. Therefore, they look to identify areas where the majority of the day or week’s transactions occur.

Statistically, about 70% of all transactions during the session take place within one standard deviation of the VWAP. This is what may be referred to as the value area. Accordingly, institutional traders are looking to execute as close as possible to the VWAP where they find plenty of supply & demand.

The Weekly VWAP for NT8

Furthermore, the VWAP calculation is also a factor in institutional performance reviews. Bonus payouts are directly linked to where the institutional traders execute relative to the VWAP. Better execution than VWAP = higher bonus payouts and good vs. bad execution is found by comparing it with the standard deviation distance from the daily or weekly VWAP.

The key point here is that the value area is located between the first standard deviation bands. Institutional traders are likely to enter positions within that area. Once prices move towards the outer bands however, they will take a step back. This behavior is in turn something you may use when evaluating setups.

Generally, the idea is to look for trend entries when prices retrace back towards the VWAP. If prices are moving towards the outer standard deviations, you’re looking to exit trend trades, alternatively consider reversal setups.

Professional VWAP Calculations

We frequently receive questions on the difference between the Current Week VWAP available from our library and the one found in our premium VWAP indicator package. The following are the most important additional features found in the premium version:

  • Prior week VWAP and the Value Area High / Value Area Low
  • The weekly VWAP level 2 and 3 weeks ago
  • Mid-standard deviation bands (0.5, 1.5, 2.5)
  • Alternative band types:
    • Residual Standard Deviation
    • Residual Mean Absolute Deviation
    • Quarter Range
  • Custom starting point for each session included in the Current Week VWAP

The prior VWAP levels serve as important key support resistance levels and it is generally a good idea to be aware of where they are located. As for the mid-bands, the regular standard deviation bands are generally far apart from one another in higher timeframe VWAPs (weekly, monthly and N-monthly). Therefore, mid-band VWAP calculations are very useful when determining dynamic support resistance levels.

Prior Weekly Value Area High and Low

The Rolling VWAP Calculation

Apart from the Current Week, the premium VWAP package also includes the Current Day, Month and N-Monthly VWAPs. These VWAP calculations have the same features as discussed above. The professional VWAP package comes with a rolling VWAP calculation. It does not use a fixed anchor point but rather a moving window of the N-previous sessions. By using a rolling VWAP period of 5 days, you may create a weekly VWAP reading also on Mondays. This effectively includes the price data from the previous week. Likewise, you may set the rolling VWAP period to 21 days, enabling a monthly VWAP reading at the start of the month. Finally, you may set the rolling period to 1 and have a reliable VWAP reading for the overnight session. This calculation will then also include the transactions from the prior session.

The Rolling VWAP for NT8

The Range Weighted Average Price (RWAP)

Finally, the premium VWAP package comes with Range Weighted Average Price (RWAP) indicators. This is useful for instruments that do not have reliable volume information (crypto/FX). The range is roughly proportional to the square root of volume. Therefore, one may mirror the volume-weighted average by calculating a weighted average using the squared ranges as the weighting factor. This method of approximating the VWAP is available for daily, weekly, monthly, N-monthly and rolling RWAP calculations.

In total, the Premium Session VWAP package contains a total of 8 different VWAP calculations; 4 VWAPs and 4 RWAPs all anchored at each session starting point. In addition, you also get the rolling VWAPs/RWAPs, calculating an average price for a rolling window of N-business days. Again, the rolling VWAP calculation is useful for determining higher timeframe trends and overbought or oversold scenarios, without anchoring them at the weekly, monthly or N-monthly session start.

Finally, the premium VWAPs take into account current holiday schedules. All major futures contracts traded on CME, CBOT, EUREX, ICE or NYMEX will therefore calculate correct VWAPs for extended trading days.

Our Weekly VWAP is available for NinjaTrader 8. Other VWAP indicators available from the Session Tools category include the Current Day VWAP, Current Month VWAP and the N-Monthly VWAP. Likewise, the Session Tools category features the Current Day TWAP, Current Week TWAP, Current Month TWAP and the N-Monthly TWAP.

Other than the Weekly VWAP available from our NinjaTrader Indicators Library version we also offer a premium VWAP indicator suite (side by side feature comparison available here).