VWAP (volume-weighted average price)
The average price paid today. Institutions benchmark to it; price tends to return to it.
What it is
VWAP is the average price weighted by volume since the session start. Buyers above it are “in profit”, sellers below it are. Many institutions try to buy below VWAP and sell above it, so it acts as a magnet and as support/resistance.
Bands at ±1σ and ±2σ show how stretched price is. In trends, price stays on one side of VWAP; in ranges it oscillates around it.
How to use it
- Note whether price is above or below VWAP at the session open.
- Trade in the direction of that side (longs above, shorts below).
- Use first touches of VWAP in a trend as pullback entries.
- Use the outer bands as take-profit areas in ranges.
Common mistakes
- Applying a daily VWAP to a multi-day swing trade.
- Fading a strong trend only because price is far from VWAP.
- Ignoring session resets.
Practise it in TradeDesk X
TradeDesk X offers day VWAP plus London, New York, Tokyo and Sydney session VWAPs. Micro’s trend filter requires price to be on the right side of its 60-minute VWAP.
Related lessons
Volume profile: POC, VAH and VAL
Shows how much traded at each price. The busiest price is a magnet; value area edges act as levels.
📘Trading sessions and kill zones
The market is busiest at the Tokyo, London and New York opens. Know when liquidity arrives.