VWAP (volume-weighted average price) is the average price of the session weighted by volume. Many institutional traders use it as a benchmark: buying below VWAP or selling above it is considered a good execution. That makes it a level many participants watch.
Reading VWAP
- Price above a rising VWAP: buyers control the session.
- Price below a falling VWAP: sellers control it.
- Price crossing VWAP back and forth: balance, no clear bias.
Two strategies
- Trend pullback: in a strong session, buy the first pullback to VWAP with a stop below the pullback low.
- Mean reversion: in a range day, fade extreme moves away from VWAP back towards it.
Where it works best
VWAP is most useful on instruments with reliable session volume, such as index futures (ES, NQ) and their CFDs during the US cash session. It resets every session, so it is an intraday tool.