Introduction
The VWAP indicator is a favorite among intraday traders. It helps identify value zones, confirm trends, and time entries/exits with greater accuracy. In this post, you’ll learn how to trade intraday using VWAP-based strategies.
What Makes VWAP Powerful for Intraday Trading?
- Resets daily, making it ideal for short-term analysis
- Reflects the true average price using volume-weighted data
- Acts as a dynamic support and resistance level
VWAP Trading Strategy #1: VWAP Bounce
Concept:
When the price retraces to VWAP and bounces off, it can signal a trend continuation.
How to Trade:
- Look for an uptrend
- Wait for price to retrace to VWAP
- Enter long when it bounces upward with confirmation (e.g., bullish candle)
- Stop-loss: Below VWAP
- Take profit: Prior swing high
VWAP Trading Strategy #2: VWAP Reversal
Concept:
When the price breaks through VWAP after trending, it may signal a reversal.
How to Trade:
- Look for an extended trend
- Wait for price to break below (or above) VWAP with volume
- Enter in the direction of the breakout
- Stop-loss: Near recent high/low
- Take profit: Next support/resistance
VWAP + Momentum Combo Strategy
Combine VWAP with a momentum indicator like RSI or MACD to confirm trades.
Example:
- Price breaks above VWAP
- RSI crosses above 50 = strong entry signal
Timeframes Best for VWAP Strategies
- 1-minute chart: Scalping
- 5-minute chart: Intraday trading
- 15-minute chart: Conservative setups
Avoid using VWAP on daily or weekly charts—it’s meant for intraday sessions only.
Common VWAP Strategy Mistakes to Avoid
- Entering against the trend
- Ignoring volume confirmation
- Using VWAP on higher timeframes
- Relying on VWAP alone without context
FAQs
1. Can VWAP be used for intraday trading?
Yes, VWAP is ideal for intraday because it resets each session and tracks price + volume.
2. Is VWAP good for scalping?
Yes, especially on the 1-minute chart with strict risk control.
3. Should I combine VWAP with other indicators?
Yes, pairing with RSI or MACD increases signal reliability.
4. What if the price stays flat around VWAP?
It indicates indecision—better to avoid trading in these zones.
5. Can I use VWAP for swing trading?
Not recommended; VWAP is best for same-day (intraday) setups.