Education

How to use VWAP the right-way on TradingView

1️⃣ What Is VWAP (Volume Weighted Average Price)?
VWAP stands for Volume Weighted Average Price. It's a tool that shows the average price an asset has traded at throughout the day, adjusted for volume. That means it gives more weight to prices with high trading volume.

✅ It helps traders and investors see if the current price is above or below the average price paid.
✅ It’s often used by institutional traders, such as mutual funds and pension funds, to enter and exit positions without causing major price moves.

VWAP = (Sum of Price * Volume) / Total Volume

2️⃣ Why VWAP Matters
I (Traders) often use VWAP as a dynamic support or resistance zone.

- Price below VWAP: considered undervalued by some 👉 may act as support
- Price above VWAP: considered overvalued 👉 may act as resistance

It acts like a magnet for price, especially in trending markets.
VWAP is also used as a benchmark for large players want to buy below VWAP or sell above it.

3️⃣ Anchored VWAP (AVWAP)
Anchored VWAP is a more advanced version of VWAP. Instead of starting at the market open, you anchor it to a specific candle (pivot high or low).

🔍 Why use it:
- Lets you analyze the average price from key market turning points
- Helps spot institutional interest near pivots
- More accurate for swing trading

When you anchor VWAP to a major high or low, it gives you clean zones where smart money might enter or exit.

4️⃣ How I Use Anchored VWAP
I personally anchor VWAP from:
- Major pivot highs/lows
- Breakout points
- Strong reversal candles

Then I watch how price interacts with it.

✅ Works well on 30m and 4H charts for intraday or swing setups
✅ Can be combined with fixed range volume profile for extra confluence

If you haven’t read my guide on fixed range volume profile, scroll below — it’s linked there.

5️⃣ Common Uses
✔️ Support and resistance zone in trending markets
✔️ Institutional entry/exit level benchmark
✔️ Reversion-to-mean setups

VWAP is used across timeframes. I use higher timeframes like 4H to spot trend zones, then zoom into 30m or 15m for entries.

Setting and more information
VWAP Explained by TradingView: tradingview.com/support/solutions/43000502018-volume-weighted-average-price-vwap/
Anchored VWAP Explained by TradingView: tradingview.com/support/solutions/43000669764-anchored-vwap/

6️⃣ VWAP Limitations
⚠️ VWAP doesn’t work well in all cases:
- In sideways/choppy markets, it can lose value
- It is not an exact entry/exit signal, but rather a dynamic zone
- In FX markets, it’s unreliable due to lack of centralized volume data

Also, treat VWAP as a zone, not a line. Large players fill big orders in that area, expect false moves or liquidity grabs.

7️⃣ Mistakes to Avoid
❌ Entering blindly on VWAP touches
❌ Using VWAP without confirmation from price action or volume
❌ Assuming it always gives perfect levels

It works best when combined with other tools, such as market structure, support/resistance, and volume profile.

8️⃣ Final Thoughts
VWAP is a powerful tool to see where price is relative to volume-based value. Anchoring VWAP to key levels adds precision and insight.

Used properly, it helps:
- Spot where institutions might be active
- Confirm high-probability zones
- Improve entries/exits when paired with other tools

Examples are provided below to show how VWAP works in real-time setups. This guide is educational and for learning purposes only.

VWAP Zone and a Example trade

Example Stock Market

Example Resistance

VWAP (Volume Weighted Average Price) helps traders see the average price weighted by volume. It's commonly used by institutions to identify good entry/exit zones. Anchored VWAP takes this further by starting from key points like pivot highs/lows for more accuracy. It's most useful in trending markets and works best when combined with tools like fixed range volume profile or support/resistance. While powerful, VWAP isn’t perfect it should be used as a dynamic zone, not a fixed level, and always with other confirmations.

Disclaimer: This is not financial advice. Always do your own research. This content may include enhancements made using AI.

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Disclaimer

The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.

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