Volume Weighted Average Price (VWAP) represents the average price an asset has traded at throughout the session, weighted by volume. It serves as a dynamic intraday fair-value benchmark used by institutional traders to gauge execution quality. For retail traders, VWAP acts as a powerful support/resistance level and trend filter — price above VWAP suggests bullish intraday bias, while price below suggests bearish bias.
VWAP resets each trading session (or can be anchored to specific events). Price above VWAP = intraday bullish bias; below = bearish. Standard deviation bands (1, 2, 3 SD) create dynamic support/resistance. Institutional traders benchmark execution against VWAP. Anchored VWAP from key events provides longer-term support/resistance.
Enter long on a pullback to VWAP during an uptrend day when price bounces with a reversal candle. Go short on a rally to VWAP during a downtrend day when price rejects with volume. Use the first-touch VWAP test after the open as a key decision point. Enter mean-reversion trades from the second or third standard deviation band back toward VWAP.
Target the opposite VWAP standard deviation band for mean-reversion trades. Exit trend trades if price closes below VWAP (for longs) or above VWAP (for shorts) with conviction. Trail stops using short-term price structure while targeting the next deviation band. Take partial profits at VWAP and let the remainder target the opposing deviation band.
1M, 5M, 15M
VWAP is most effective for intraday trading — it resets daily, making it less useful on higher timeframes unless you use anchored VWAP. The first touch of VWAP each session carries the most significance. Use VWAP in conjunction with pre-market levels and prior-day reference points for a complete intraday framework.
On-Balance Volume is a cumulative volume indicator that adds volume on up days and subtracts it on down days, creating a running total that reveals whether volume is flowing into or out of an asset. Developed by Joe Granville, OBV often leads price — a rising OBV during a consolidation suggests accumulation, while a falling OBV during a hold signals distribution. The direction of OBV matters more than its absolute value.
The Accumulation/Distribution Line measures the cumulative flow of money into and out of an asset by examining where price closes within its range relative to volume. Unlike OBV, which only considers whether the close is up or down, the A/D Line weights volume by the close's position within the bar's range, giving a more nuanced picture of buying and selling pressure.
Anchored VWAP (Volume-Weighted Average Price) allows traders to calculate the average price weighted by volume from any specific point in time, such as a major high, low, earnings event, or market open. Unlike the standard session VWAP that resets daily, anchored VWAP persists from the chosen anchor point, revealing the average cost basis of all participants who traded since that event and creating dynamic support and resistance levels.
The Money Flow Index is a volume-weighted RSI that measures buying and selling pressure by incorporating both price and volume data. It oscillates between 0 and 100, with readings above 80 considered overbought and below 20 considered oversold. Because it includes volume, MFI often provides earlier reversal signals than standard RSI, making it particularly effective for identifying exhaustion moves.