VWAP
The volume-weighted average price: the 'fair value' reference institutions follow.
VWAP averages prices weighted by volume since the open. Above it, buyers control the session; below it, sellers. Many algorithms execute around VWAP, making it both a magnet and a trend filter.
In depth
VWAP (Volume Weighted Average Price) is not a classic moving average: each price is weighted by the volume traded, so a price dealt with many contracts weighs more. It represents the real 'average cost' of all participants since the starting point (usually the session open). That's why institutional desks use it as an execution benchmark: beating VWAP means having bought below the market's average.
In order flow trading, VWAP acts as a bias filter and a magnet. Above it, the average buyer is in profit and the bullish side has control; below it, the reverse. Standard-deviation bands around VWAP (1σ, 2σ) mark stretch zones where price tends to revert toward the mean.
On DeepCharts, show the session VWAP with its bands. Use it as a compass: only look for buys while price holds above, sells while it holds below. A clean VWAP rejection after a test, confirmed by a delta flip, offers low-risk entries with the mean at your back.
Price rejects VWAP from above and pushes higher → bullish continuation.
Treating VWAP as a mechanical signal ('it touches, I buy'). VWAP is context, not a trigger. In a strong trend, price can stay far from VWAP for hours; systematically playing the mean reversion loses against a directional market.
Frequently asked
VWAP vs moving average: what's the difference?
A moving average weights each candle equally (or by recency). VWAP weights by volume: the most-traded prices count more. So it better reflects participants' real cost.
When does VWAP reset?
Most often at each session open. Some traders also use VWAPs anchored to a specific event (weekly open, macro release) to measure average cost since that point.
Does VWAP work for day trading futures?
Yes, it's one of its home grounds: on NQ, ES or FDAX, a large share of institutional volume executes around VWAP, making it a widely watched intraday reference.
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