VWAP — Volume-Weighted Average Price — is the average price of the session weighted by volume: the honest "fair price" where the day's business was actually done. Institutions benchmark their fills against it, which is exactly why it behaves like a magnet and a battleground intraday. Price above VWAP = buyers paid up and are in control; below = sellers are. Few indicators map so directly onto who's winning today.

Unlike moving averages, VWAP resets each session, making it a genuinely intraday tool (5m–15m charts).

Strategy 1: VWAP pullback (trend continuation)

The bread-and-butter setup: join an established intraday trend at fair value.

• Setup (long): price opened or broke above VWAP and is holding above it; VWAP visibly sloping up
• Entry trigger: price pulls back to VWAP and prints a rejection there — a hammer, bullish engulfing, or simply a close bouncing off the line
• Stop-loss: below the pullback low, just past VWAP
• Target: the high of the day, then trail; first touch of VWAP after a strong move is the highest-quality entry
• Short: mirror below a falling VWAP

Strategy 2: VWAP reclaim (reversal)

When a downtrending session breaks and holds above VWAP, the day's control has flipped.

• Entry: price closes above VWAP, pulls back, and holds it from the topside — enter on that hold
• Stop: below the reclaim low
• Target: prior session high or the day's range extreme

The reclaim is stronger when it coincides with a level from the support/resistance map.

What not to do: fade every touch

Selling every rally to VWAP in an uptrend feels clever and loses steadily — in trend days, price tags VWAP and resumes repeatedly. Fading VWAP is only viable on clearly balanced, rotational days, and even then the middle of the range is the worst place to trade. When in doubt, trade with the VWAP slope.

How to backtest it

VWAP setups appear several times per session, so replay backtesting is fast:

1. Open chart replay on 5m or 15m candles at a random point in history.
2. Classify the day early: trending (one side of VWAP, sloping) or balanced (crossing repeatedly).
3. Trade only pullbacks and reclaims for 50 logged trades, per the backtesting method.
4. Tag each trade with the day type — your stats will almost certainly show the edge concentrates on trend days, which then becomes your filter.

Common mistakes

1. Using VWAP on 4H/daily charts — it's a session tool; use moving averages for higher timeframes.
2. Entering at VWAP without a rejection signal — the line is a location, not a trigger.
3. Fading trend days — the most common and most expensive VWAP error.
4. Ignoring the slope — flat VWAP means balance; both breakouts and fades get chopped there.

FAQ

What is VWAP in simple terms?

The session's average traded price, weighted by volume — where the "real money" changed hands today. Above it buyers are in profit and in control; below it, sellers.

Is VWAP good for scalping?

Yes — VWAP pullbacks on 1–5m charts are a staple scalping setup. The rejection-signal requirement matters even more at that speed.

VWAP vs. moving average — what's the difference?

A moving average weights only time; VWAP weights price by volume and resets daily. Intraday, VWAP reflects actual positioning far better. On multi-day charts, use EMAs instead.