I have heard a lot about VWAP but I am still unsure about its practical application.
I understand it means volume weighted average price. However, when I check the charts, I struggle to see how it aids trading decisions.
Do others use VWAP often? Is it useful for timing entries and exits or is it better suited for long term strategies?
VWAP acts like a moving average but factors in trading volume at different price levels each day.
Institutional traders rely on it to see if their order fills are favorable. If price repeatedly tests and bounces off VWAP, it often signals good trading chances.
On mobile charts, VWAP appears as a line that shifts with volume changes. It tends to perform better during high volume periods when there is more activity.
VWAP shows fair value based on actual trading volume.
• Price above VWAP = bullish momentum
• Price below VWAP = bearish momentum
• Works best on intraday timeframes
Use it as dynamic support/resistance level for entries.
Lost $400 ignoring VWAP when I first started trading binary options.
My entry was way above the VWAP line and I thought momentum would carry it higher. Wrong move. The price pulled back to VWAP like a magnet.
Now I wait for price to touch VWAP before entering. It gives me better entry points and reduces my losses significantly.
VWAP helps in quick trades. Watch bounces for better timing on entries.
VWAP is essential for judging market control. If the price is above it, buyers dominate. Below it, sellers take over.
For timing trades, observe price reactions at VWAP. A bounce indicates the trend may continue, while a break suggests a potential reversal.
Volume plays a crucial role here. VWAP is most effective during busy trading hours when there is high activity. In quiet times, its reliability fades.
Remember, VWAP resets every day, so analyze it with each session.