VWAP

What it is

VWAP (volume-weighted average price) is the average price traded since the session started, giving more weight to prices where more volume traded. It resets each day.

Large traders use it to judge whether they bought or sold well, so price often reacts around it. An anchored VWAP starts from a chosen point instead of the session open, such as a major high or low.

On spot forex and CFDs there is no central volume, so VWAP is built from the broker's tick volume (a count of price changes). It still works as an average, but it is not the same line the futures market sees.

How to spot it

• Above VWAP: buyers have the upper hand for the day. Below: sellers do.
• Price repeatedly bouncing off VWAP in a trend shows it's acting as support or resistance.

How to use it

• In a trending day, look for pullbacks to VWAP in the trend's direction.
• In a range day, price tends to rotate back to VWAP from the extremes.

Common mistakes

• Using the daily VWAP on a swing trade held for days.
• Ignoring that VWAP is weaker early in the session, when there's little volume behind it.

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