Guideline · 2022-06-06

How to trade VWAP

By The Balanced Trader2022-06-06

A first look at VWAP, how and when to trade it: volume building into VWAP at 4140 on 6th June 2022, where it lined up with the IB low and the POC, and two execution examples from my charts.

VWAPConfluenceIB lowAbsorption

Schematic intraday chart: the first hour forms the initial balance; price rotates and works lower into a level where the VWAP, the IB low and the POC all line up, circled as confluence, while volume bars rise into the touch.

The idea

Here is a preview of some material I have started putting together. I rushed to publish it because VWAP is such an important tool. I will come back to it and run through some good examples in real time.

How to spot it

ConfluenceToday was one of those days: 6th June 2022, around 12.30 central time. Notice how volume increased into the VWAP at 4140, which coincided with the IB low and the POC. All excellent reference points, and together we have confluence. Enjoy.

Liquidity into VWAPThe 10th June CPI chart is a good example of a VWAP trade: as price moves towards VWAP, liquidity increases. The initial impulse lower came into a VWAP that had previously held to the downside. Selling delta getting absorbed, and volume increasing into VWAP: liquidity increasing.

Location and cluesOn the 14th June chart, what I liked about the trade idea were the prior clues: the auction was weak (see the candles chart). The location was also interesting: VWAP was trading in the HVN on the composite profiles and in yesterday's LVN area.

Schematic of a VWAP short: price rallies from prior poor lows into a falling VWAP and is rejected three times inside an execution zone; after the third rejection price moves away quickly, with the plan to take out the poor lows. Notes: the auction was weak, VWAP sat in the HVN on the composite and yesterday's LVN, and price moved away from entry quickly.

ES footprint chart of 10 June 2022 (CPI), marked up with the initial impulse lower into VWAP, bubbles and absorption, a scaled entry with risk at 3916.5, reversals and two rounds of scaling out. — On the day: 10th June 2022, CPI: a Friday liquidation continuation day. A good example of a VWAP trade: as price moves towards VWAP, liquidity increases.

ES footprint chart of 14 June 2022 with three rejections into VWAP marked, the execution zone boxed, and my notes on the trade. — On the day: 14th June 2022: rejection into VWAP three times, the third inside the execution zone, with a plan to take out the prior poor lows.

Schematic of a VWAP long: an initial impulse lower into a VWAP that has held before, absorption with large-trade bubbles at VWAP, a scaled entry with risk just below, a reversal and scaling out, a second attempt where buyers are more aggressive above VWAP, and price finishing above the scene of the crime. A delta panel marks the absorbed selling delta and the big delta reversal.

How to trade it

10th June 2022, CPIA Friday liquidation continuation day. The initial impulse lower into VWAP: bubbles, then absorption. Scaled entry, risk 3916.5. Reversal, then scaling out. Another attempt: bubbles again and absorption, but buyers getting more aggressive above VWAP, and a big delta reversal. Price now above the scene of the crime: scaling out.

14th June 2022Rejection into VWAP, three times. The third came inside my execution zone, and I executed the trade with a plan to take out the prior poor lows. I didn't get the bigger flush I was hoping for, but it was an easy trade to take. Top clue: price moved away from entry quickly. I want to place orders to fill in these areas.

Key takeaways

TakeawayLook for confluence: volume increasing into VWAP where it coincides with other excellent reference points, such as the IB low and the POC.

TakeawayAs price moves towards VWAP, liquidity increases. Selling delta getting absorbed as volume increases into VWAP is the sign to watch.

TakeawayTop clue: price moved away from entry quickly. I want to place orders to fill in these areas.

See it in the journal

Real sessions where this happened, written up on the day.

2026-11-10VWAPMon 9th Nov 2026 – Trend day up: overnight short covering runs through the open to a flat top at 7600 2023-02-06VWAPDebrief · 3 February 2023 · NFP Friday, in charts 2023-01-06VWAPDebrief · 5 January 2023 · NFP day: no plan, just the island extremes 2023-01-04VWAPDebrief · 3 January 2023 · FOMC minutes day: yields fall into the main event 2023-01-03VWAPDebrief · 30 December 2022 · First day of the trading year: stocks and bonds bid

Auction concepts · 6 of 8

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