How to Use VWAP, Deviation Bands and Historical VWAP Levels in MT5
It helps traders understand where price is trading relative to the volume-weighted average price, whether the market is balanced around value, or whether price is becoming extended.
VWAP can become even more useful when it is combined with deviation bands and important historical VWAP-based levels from completed periods.
This article explains how to use current VWAP, deviation bands and historical levels in MetaTrader 5.
What Does VWAP Show?
VWAP stands for Volume Weighted Average Price.
Unlike a simple moving average, VWAP takes volume into account when calculating the average price.
In practical terms, it helps answer a simple question:
Where is the average volume-weighted price for the selected period?
When price trades close to VWAP, the market may be relatively balanced around its average.
When price moves farther away from VWAP, the market may be becoming statistically extended.
VWAP Deviation Bands
Deviation bands add another layer of information around VWAP.
They show how far price is trading from the current VWAP and can help identify areas where the market is relatively balanced or extended.
Typical VWAP structures may include:
- VWAP
- Upper Band 1
- Lower Band 1
- Upper Band 2
- Lower Band 2
- Upper Band 3
- Lower Band 3
Bands can be calculated using standard deviation or, depending on the indicator, as a percentage distance from VWAP.
The first deviation band is especially useful because it creates a practical reference zone around VWAP.
Example of the current VWAP, deviation bands and historical levels from the previous completed period.
Why Keep Historical VWAP Levels?
The current VWAP tells us where the average price is developing now.
But information from the previous completed period can also be valuable.
For example, after a Daily / Session VWAP period finishes, we can preserve:
- Historical VWAP
- Historical Upper Band 1
- Historical Lower Band 1
These levels can then be projected into the following session.
This makes it easy to see how the current market reacts when price returns to important VWAP-based reference levels from the previous period.
Previous-Period VWAP Value Zone
The area between the previous period's Lower Band 1 and Upper Band 1 can be used as a practical previous-period value-zone reference.
It can help answer questions such as:
- Is price trading back inside the previous VWAP zone?
- Is the market accepting prices above the previous period?
- Is price rejecting the previous VWAP?
- Is the market returning toward previous balance?
- Is price extending away from previous value?
This is not the same as a Volume Profile Value Area.
A Volume Profile Value Area is calculated from volume traded at individual price levels.
The VWAP zone described here is based on VWAP and its deviation bands.
Historical Level Display Modes
Historical levels do not always need to stay on the chart forever.
Different traders may prefer different behavior.
Until first touch - max 1 period
This is the default mode in VWAP Historical Levels.
The historical level remains visible until price touches it.
If price does not touch it, the level automatically expires at the end of the following anchor period.
For a Daily / Session VWAP, this means yesterday's level can remain visible during today's session, but it will not continue indefinitely into future sessions.
Until first touch - no limit
In this mode, the level remains visible until price eventually touches it.
It can therefore remain on the chart across several future periods.
Entire next anchor period
In this mode, the level remains visible throughout the complete following anchor period.
A price touch does not remove it early.
This is useful when the trader wants to keep the complete previous-period structure visible for the entire next session, week or month.
Using Different VWAP Anchor Periods
VWAP does not have to be limited to a single trading session.
Depending on the type of analysis, it can be anchored to different periods such as:
- Daily / Session
- Weekly
- Monthly
- Quarterly
- Yearly
- Longer-term periods
This makes VWAP useful for both intraday trading and higher-timeframe market analysis.
Example of a Yearly VWAP on a Daily chart and a Daily VWAP on an intraday chart.
Higher-Timeframe Context and Intraday VWAP
Different VWAP periods can answer different questions.
A Yearly VWAP on a Daily chart can provide broader market context.
At the same time, a Daily VWAP on an intraday chart can provide a more precise view of the current trading session.
This allows the trader to separate:
Higher-timeframe context
from
Lower-timeframe execution and timing
The same principle can be applied with Weekly, Monthly or Quarterly VWAP periods.
Customizing VWAP and Bands
Different markets and trading styles may require different settings.
Useful configurable parameters include:
- Anchor period
- Price source
- Volume source
- VWAP color and line width
- Band calculation method
- Band multipliers
- Band colors
- Line styles
- Line widths
- Transparency
- Historical level colors
- Historical level display mode
This allows the VWAP structure to be adapted to both simple and more advanced chart layouts.
VWAP, bands, historical levels and alerts can be configured independently.
VWAP Alerts
VWAP levels are also useful as alert locations.
Instead of constantly watching the chart, traders can be notified when price reaches an important level.
Alerts may be useful for:
- Current VWAP
- Current Band 1
- Current Band 2
- Current Band 3
- Historical VWAP
- Historical Upper Band 1
- Historical Lower Band 1
Notifications can be displayed as standard MetaTrader 5 popup alerts.
Push notifications can also be sent to the MetaTrader mobile application when configured in the terminal.
Example of an alert triggered when the latest candle reaches Current Lower Band 1.
Why Historical VWAP Levels Can Be Useful
Historical VWAP levels can provide useful market structure without adding many additional indicators to the chart.
Possible uses include:
- Previous areas of market balance
- Potential support and resistance
- Reactions to previous VWAP
- Returns into a previous VWAP zone
- Acceptance above or below previous levels
- Mean-reversion areas
- Trend continuation areas
They should not be treated as automatic trading signals.
Their value comes from showing where important VWAP-based reference points from previous periods are located.
VWAP Historical Levels for MetaTrader 5
I created VWAP Historical Levels for MetaTrader 5 to combine these concepts in one indicator.
It includes:
- Current VWAP
- Up to three upper and lower deviation bands
- Standard-deviation or percentage-based bands
- Historical VWAP
- Historical Upper Band 1
- Historical Lower Band 1
- Three historical-level display modes
- Daily, Weekly, Monthly, Quarterly and Yearly anchor periods
- Configurable price and volume sources
- Popup alerts
- Optional mobile push notifications
- Custom colors, line styles and transparency
The indicator is available free of charge in the MQL5 Market.
VWAP Historical Levels:
Download VWAP Historical Levels for MT5 – Free
Final Thoughts
VWAP provides useful information about where the market is trading relative to its volume-weighted average price.
Deviation bands add information about how far price has moved from that average.
Historical VWAP levels add another layer by preserving important reference points from completed periods.
Used together, these tools can provide a simple framework for understanding both current market structure and previous-period context.
As with any analytical tool, VWAP should be combined with the trader's own strategy, market analysis and risk management.
