ATR-Normalized VWMA Deviation

This indicator measures how far price deviates from the Volume-Weighted Moving Average (VWMA), normalized by market volatility (ATR). It identifies significant price reversal points by combining price structure and volatility-adjusted deviation behavior.

The core idea is to use VWMA as a dynamic trend anchor, then measure how far price travels away from it relative to recent volatility. This helps highlight when price has stretched too far and may be due for a reversal or pullback.

How it works:

• VWMA deviation is calculated as the difference between price and the VWMA.
  
• That deviation is divided by ATR (Average True Range) to normalize for current volatility.
  
• The script tracks the highest and lowest normalized deviations over the chosen lookback period.
  
• It also tracks price structure (highest/lowest highs/lows) over the same period.
  
• A reversal signal is generated when a historical extreme in deviation aligns with a price structure extreme, and a confirmed reversal candle forms.
  
• You get visual signals and color highlights where these conditions occur.
  

Settings explained:

• Lookback period defines how many bars the script uses to find recent extremes.
  
• ATR length controls how volatility is measured.
  
• VWMA length controls how the volume-weighted moving average is calculated.
  
• Signal filters help refine entries based on price vs deviation behavior.
  
• Display options let you customize how signals and levels appear on the chart.
  

This indicator is especially useful for spotting potential turning points where price has moved far from VWMA relative to volatility, suggesting possible exhaustion or overextension.

Tips for use:

• Combine with broader trend context (higher timeframe support/resistance).
  
• Use with risk management rules (position sizing, stops) — signals are guides, not guaranteed entries.
  
• Adjust lookback and ATR settings based on your trading timeframe and asset volatility.