VWAP
VWAP is the average price weighted by volume since the session opened. Day traders use it as an intraday fair-value line, trend filter and support or resistance level.
Full name
Volume Weighted Average Price
Default settings
Resets each session; optional 1–2 standard deviation bands
Formula
VWAP = cumulative (typical price × volume) / cumulative volume, reset each session; typical price = (high + low + close) / 3
What VWAP is
Volume Weighted Average Price is the average price paid for an instrument during the session, weighted by how much volume traded at each price. It resets at the start of every session. Institutions often benchmark execution quality against it, which is why so many traders watch it.
How day traders use it
Intraday bias
Price holding above VWAP suggests buyers are in control for the day; holding below suggests sellers are. Many day traders only take longs above VWAP and shorts below.
Pullback entries
In a trending session, price often pulls back to VWAP before continuing. A rejection there, with a stop on the other side, is a common setup.
Bands as targets
Standard-deviation bands around VWAP mark stretched moves. Price reaching the second band in a range-bound session is often a place to take profit, not add.
Things to know
- VWAP needs real volume data. In spot forex there's no central exchange, so broker "tick volume" is a proxy. It's more reliable on futures and stocks.
- It's an intraday tool. Anchored VWAP extends the idea to start from any event, such as an earnings release.
- Late in the session VWAP moves slowly because so much volume is already included.
For a full intraday plan, see the scalping strategy.
Indicators work best inside a plan
See which strategies use this indicator, then size the trade before you enter.