What it is
VWAP is the average price traded during the session, weighted by volume. It resets each session, which is why it is an intraday tool rather than a trend tool.
How traders use it
- As the dividing line between buyer and seller control
- As a reference for reclaim and rejection setups
- As an execution benchmark for larger orders
Worked example
A stock sells off in the first hour, grinds back and reclaims VWAP on rising volume. Momentum traders use that reclaim as the trigger, with the level as the stop.
Limitations
- Resets daily, so it says nothing about longer trends
- Less meaningful in thin, low-volume names
Common mistakes
- Treating VWAP as guaranteed support
- Using it on higher timeframe charts
Educational content only. TradeCaster does not provide financial advice and past results never imply future performance.