Glossary · V
What is VWAP bands?
Lines drawn a number of volume-weighted standard deviations above and below VWAP, describing how stretched price is relative to the session's average.
In context
In statistics, if data follow a normal distribution (the familiar symmetric "bell curve"), about 68% of values lie within ±1σ of the mean and about 95% within ±2σ. This is called the 68–95 rule. Many traders transfer it straight onto VWAP bands: "Price is at +2σ, so there is a 95% chance it reverses." That conclusion is wrong, for three separate reasons.
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Related terms
VWAP (Volume-Weighted Average Price)
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