Volume Weighted Average Price
VWAP · module 32 of 33 · levels
The average price weighted by volume since a session start.
- Session VWAP
- ▲/▼ where the rule triggers
Volume-weighted average price, reset each session. Above it buyers have paid up on average; below, sellers.
How to apply it
- 1. Add it. Start with Session VWAP on 1m/5m (Scalping).
- 2. Read the market first. Price holding above a rising VWAP indicates intraday buyers in control; pullbacks to VWAP are reference entries.
- 3. Adjust for ranges. Price oscillating across VWAP marks a balanced session with no intraday edge.
- 4. Manage the trade. Place the stop at 1.5 × ATR and the target at 3.5 × ATR, and only act when the chart above shows the trigger.
How it is calculated
VWAP = Σ(TP × Volume) ÷ Σ Volume, reset at each session start, where TP = (H + L + C) ÷ 3.
Inputs
- · Session anchor
- · Optional standard-deviation bands
Volume caveat. This module uses volume. In retail spot forex that means tick volume — the number of price updates from one broker's feed — not traded contract volume. Readings differ between providers.
Reading it correctly
In a trend
Price holding above a rising VWAP indicates intraday buyers in control; pullbacks to VWAP are reference entries.
In a range
Price oscillating across VWAP marks a balanced session with no intraday edge.
Settings by style
| Style | Suggested values |
|---|---|
| Scalping | Session VWAP on 1m/5m |
| Intraday | Session VWAP with 1σ bands on 5m/15m |
These are conventional starting points, not optimised values. Test any change on your own pair and timeframe before relying on it.
Worked example
Three candles: TP 1.0880 with 1,200 ticks, 1.0890 with 800, 1.0885 with 1,000. VWAP = (1.0880×1200 + 1.0890×800 + 1.0885×1000) ÷ 3000 = 1.08847. Note that these are tick counts, not traded contract volume.
When it failed
VWAP computed on a 4h chart without a session reset drifted meaninglessly over three weeks and provided no usable reference. VWAP is a session tool by construction.
Limitations
- Volume caveat: spot forex is decentralised, so retail platforms supply tick volume (the number of price updates) from that broker's feed, not true market volume. Readings differ between brokers.
- Needs a correct session anchor; without a reset the value is meaningless.
- Weighted by the whole session, so it becomes progressively less responsive late in the day.
Works well alongside
- · Pivot points
- · ATR
- · Market structure
Redundant with
- · Session moving averages
- · Pivot points
Stacking these produces agreement by construction, which is not confirmation.
Practice exercise
Compare tick-volume VWAP on 5m EUR/USD from two different data sources for the same session and record how far the two lines diverge.
Check your understanding
1. In retail spot forex, VWAP's volume input is usually:
- · Exchange-traded contract volume
- ✓ Tick volume — the number of price updates from one broker's feed
- · Open interest
- · Order-book depth
Spot forex has no central exchange, so platforms substitute tick counts. Readings therefore vary by provider.
2. VWAP must be:
- · Smoothed with an EMA
- ✓ Anchored and reset at a session start
- · Calculated on closes only
- · Combined with RSI
Its cumulative construction requires a defined session anchor; without a reset it loses all meaning.