equalizer
VWAP Strategy
Trade based on the volume-weighted average price
Intermediateplay_arrowTry in Backtesting
What Is This Strategy?
VWAP (Volume Weighted Average Price) shows the average price a stock has traded at throughout the day, weighted by volume. Institutional traders often use VWAP as a benchmark.
How It Works
- VWAP is calculated as cumulative (Price × Volume) ÷ Cumulative Volume
- Price below VWAP = potential buy zone (discount)
- Price above VWAP = potential sell zone (premium)
- VWAP acts as dynamic support/resistance throughout the day
- Best used for intraday trading, resets each day
Key Parameters
Anchor
VWAP reset period
Deviation Bands
Standard deviation bands
When to Use
check_circle
Best For
- • Intraday trading
- • High-volume stocks
- • Following institutional flow
cancel
Avoid When
- • Overnight holds
- • Low-volume stocks
- • After-hours trading
Risks & Limitations
warning
Be Aware
- • Only useful for intraday - resets daily
- • Less effective in trending days when price stays on one side
- • Needs sufficient volume to be meaningful
Example Trade
Scenario
SPY opens gap up, then pulls back to VWAP in the first hour.
BUY
Reasoning
VWAP is acting as support. Institutions likely buying at "fair value."
Ready to Test This Strategy?
Backtest this strategy on historical data to see how it would have performed.
play_arrowOpen BacktestingReady to Apply What You've Learned?
Start paper trading with real market data and test your strategies risk-free.