The VWAP for the timing of your entries and exits!
What is the VWAP?
VWAP is an abbreviation for Volume Weighted Average Price – you may already know that. What does this mean? It is basically the average or median price of the daily trading margin based on the volume. This average price now acts as a magnet in sideways phases and as support or resistance in a trend movement – and can therefore be the basis of a volume strategy.
Let’s take a look at an example of the oil price for each case:
VWAP as a magnet in sideways markets
In the graphic we see that the VWAP acts as a magnet. Each time the price deviates too far from the average, it withdraws it.
Well, this may seem very simple in hindsight, but due to the volatility in some markets, it is very difficult to catch them every time and calculate their risk. For this reason, there are standard deviations in ATAS that can be added.
Luckily, you can combine this with Order Flow Charts and the context of the volume profile to give your trade a higher hit rate. Working with the VWAP is one of the oldest volume strategy tools.
VWAP acts as support in the trend markets
In this 4 hour chart you can see that I use the weekly VWAP. I use this chart because I want to show you that the VWAP works in all time units and charts because the volume is calculated as average.
As you can see on the charts, there are several opportunities to find entry. You can also read HERE how to recognize trend reversals in the Footprint Chart.