Works in both trending and ranging markets with different applications
| Strategy Type | Mean Reversion / Trend Confirmation |
| Market Outlook | Works in both trending and ranging markets with different applications |
| Risk Profile | Medium - VWAP provides institutional reference for entries |
| Reward Profile | 1.5:1 to 2.5:1 risk-reward depending on setup type |
| Time Horizon | Intraday to multi-day; VWAP resets daily |
| Iv Environment | Best in normal volatility; extreme volatility can cause extended deviations |
| Breakeven | Entry price plus spread; VWAP provides reference for fair value |
| Primary Instruments | Brent Crude CFD via IG/CMC/Pepperstone (UKOIL/XBRUSD); Brent futures via IB |
| Asic Compliance | ASIC regulated; CFD leverage limits apply (10:1 max for commodities); retail client protections in place |
| Contract Size | CFD: Typically A$1 per 1 cent move (varies by broker); Futures: 1,000 barrels per contract |
| Vwap Reset Time | VWAP typically resets at session start; for oil, often aligned with NYMEX open or midnight UTC |
| Trading Hours | CFDs: Near 24 hours Mon-Fri; VWAP most relevant during London (6 PM - 2 AM AEST) and NY sessions |
| Settlement | CFDs cash settled; positions can be held through VWAP reset |
| Tax Treatment | CFD profits taxed as income (no CGT discount); intraday trading typical |
| Institutional Relevance | VWAP is benchmark for institutional execution; retail traders can use this to their advantage |
| Chess Sponsorship | Not applicable - VWAP trading uses CFDs/futures, not ETFs |
VWAP resets to reflect current session dynamics. Yesterday's average is less relevant than today's. However, you can use weekly or monthly VWAP for longer-term reference. Session VWAP shows today's fair value; multi-day VWAP shows longer-term fair value.
VWAP is typically displayed on intraday charts (1min, 5min, 15min, 1H). It's calculated from session data regardless of chart timeframe. Lower timeframes show more detail for entries; higher timeframes show cleaner picture. Most traders use 5-15 minute charts for VWAP trading.
Use TradingView for analysis (free account available) and execute on your broker platform. Mark VWAP levels manually on your broker's chart, or set alerts on TradingView that notify you when to check your broker platform.
VWAP works on any liquid market with good volume data. Oil (Brent, WTI) is highly liquid with strong institutional participation, making VWAP particularly useful. It's also excellent for stocks, forex majors, and indices. Less useful for illiquid markets.
Never enter just because price touches VWAP. Always wait for price action confirmation - a rejection candle showing the level is being respected. Entry on a hammer at VWAP is much higher probability than blindly buying at VWAP.
Count VWAP crosses: 0-1 cross = trending; 3+ crosses = ranging. Also check VWAP slope: clear slope = trending; flat = ranging. In trending markets, trade pullbacks to VWAP. In ranging markets, trade band bounces with VWAP as target.
London session (6 PM - 2 AM AEST) offers the best VWAP setups. VWAP has had time to establish, trends are clearer, and volume is good. London-NY overlap (10 PM - 2 AM AEST) has highest volume but may be late for some Australian schedules.
Use time stops. For intraday VWAP trades, if target not hit within 2-4 hours, consider exiting. Definitely close before session end (and VWAP reset) unless you're prepared to hold through the reset with different reference levels.
Use 2 std dev as primary (covers ~95% of price action). 1 std dev is too frequently touched for mean reversion. 3 std dev is extreme and rarely touched but offers highest probability reversal when it is reached. Start with 2 std dev bands.
Yes. VWAP can confirm or filter other strategies. For breakouts: a breakout with VWAP supporting the direction (price staying above VWAP in upside break) is higher probability. For mean reversion: VWAP band touches align well with RSI extremes.
Collect intraday data with volume over 6+ months. Calculate VWAP deviations at trade times. Track outcomes by: (1) deviation level at entry, (2) session type (trending/ranging), (3) time since session start, (4) volume relative to average. Build scoring model; backtest; validate out-of-sample.
Both are volume-based levels. POC (Point of Control) is the single price with highest volume. VWAP is the volume-weighted average of all prices. When POC and VWAP are at the same level, it's an extremely strong support/resistance zone. They often diverge in trending markets.
Look for: (1) Consistent volume throughout session (VWAP algos spread orders evenly), (2) Price gravitating to VWAP especially at session end, (3) Buying pressure consistently appearing below VWAP, selling above. During high-volume overlap periods, this activity is most visible.
VWAP strategies fail when: (1) News causes sustained move away from VWAP (don't fade strong news), (2) Gap opens far from prior VWAP (new reference needed), (3) Low volume sessions (VWAP less representative), (4) Regime change where institutional behavior shifts. Monitor for these conditions.
Start with TradingView alerts (Pine Script) for VWAP touches and band reaches. For full automation: Python + broker API (IBKR) or MT4/MT5 EA. Key components: VWAP calculation, deviation bands, price action pattern detection, position sizing, order management. Test extensively in paper trading first.
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