Dynamic VWAP: Fair Value & Divergence Suite

Dynamic VWAP: Fair Value & Divergence Suite

Dynamic VWAP: Fair Value & Divergence Suite is a comprehensive tool for tracking contextual valuation, overextension, and potential reversal signals in trending markets. Unlike traditional VWAP that anchors to the start of a session or a fixed period, this indicator dynamically resets the VWAP anchor to the most recent swing low. This design allows you to monitor how far price has extended from the most recent significant low, helping identify zones of potential profit-taking or reversion.

Deviation bands (standard deviations above the anchored VWAP) provide a clear visual framework to assess whether price is in a fair value zone (±1σ), moderately extended (+2σ), or in zones of extreme extension (+3σ to +5σ). The indicator also highlights contextual divergence signals, including slope deceleration, weak-volume retests, and deviation failures—giving you actionable confluence around potential reversal points.

Because the anchor updates dynamically, this tool is particularly well suited for trend-following assets like BTC or stocks in sustained moves, where price rarely returns to deep negative deviation zones. For this reason, the indicator focuses on upside extension rather than symmetrical reversion to a long-term mean.

🎯 Key Features
✅ Dynamic Swing Low Anchoring

Continuously re-anchors VWAP to the most recent swing low based on your chosen lookback period.

Provides context for trend progression and overextension relative to structural lows.

✅ Standard Deviation Bands

Plots up to +5σ deviation bands to visualize levels of overextension.

Extended bands (+3σ to +5σ) can be toggled for simplicity.

✅ Conditional Zone Fills

Colored background fills show when price is inside each valuation zone.

Helps you immediately see if price is in fair value, moderately extended, or highly stretched territory.

✅ Divergence Detection

VWAP Slope Divergence: Flags when price makes a higher high but VWAP slope decelerates.

Low Volume Retest: Highlights weak re-tests of VWAP on low volume.

Deviation Failure: Identifies when price reverts back inside +1σ after closing beyond +3σ.

✅ Volume Fallback

If volume is unavailable, uses high-low range as a proxy.

✅ Highly Customizable

Adjust lookbacks, show/hide extended bands, toggle fills, and enable or disable divergences.

🛠️ How to Use
Identify Buy and Sell Zones

Price in the fair value band (±1σ) suggests equilibrium.

Reaching +2σ to +3σ signals increasing overextension and potential areas to take profits.

+4σ to +5σ zones can be used to watch for exhaustion or mean-reversion setups.

Monitor Divergence Signals

Use slope divergence and deviation failures to look for confluence with overextension.

Low volume retests can flag rallies lacking conviction.

Adapt Swing Lookback

30–50 bars: Faster re-anchoring for swing trading.

75–100 bars: More stable anchors for longer-term trends.

🧭 Best Practices

Combine the anchored VWAP with higher timeframe structure.

Confirm signals with other tools (momentum, volume profiles, or trend filters).

Use extended deviation zones as context, not as standalone signals.

⚠️ Disclaimer
This script is for educational and informational purposes only. It does not constitute financial advice or a recommendation to buy or sell any security or asset. Always do your own research and consult a qualified financial professional before making any trading decisions. Past performance does not guarantee future results.