VWAP Reversion

Most platforms have VWAP as a built-in indicator. In TradingView, search 'VWAP' in indicators. In ThinkorSwim, add 'VWAP' study. Make sure to enable standard deviation bands (1, 2, 3 SD) for reversion trading.

Standard VWAP resets daily, so it's primarily for intraday. For swing trades, use 'anchored VWAP' from significant points (like swing low or earnings). Weekly VWAP or anchored VWAP can provide longer-term context.

VWAP resets at market open each day. Yesterday's VWAP has no bearing on today's price. Each day starts fresh, calculating the new volume-weighted average from that day's open.

VWAP should be identical if calculated correctly. However, some platforms use different typical price formulas (HLC vs OHLC). Minor differences may exist, but standard VWAP using (H+L+C)/3 is most common.

VWAP reversion is higher frequency, so commissions matter significantly. Calculate your break-even (e.g., $10 commission on $5,000 position = 0.4% round-trip). Ensure your average profit exceeds commission costs.

By 10:30-11:00 AM, count VWAP crosses. 3+ crosses = range day (good for reversion). 0-1 crosses = trending day (avoid reversion, trade with trend). Also check VWAP slope - flat = range, angled = trend.

Start with 1.5-2 SD for higher probability entries. 1 SD entries have more signals but lower win rate. 2+ SD entries have fewer signals but higher probability. Match your style - aggressive (1 SD) vs conservative (2 SD).

Rising VWAP with price below shows the average is being pulled up by previous higher prices, but current sellers are pushing price down. This is a complex situation - price below rising VWAP can signal support (VWAP catching up) or breakdown risk.

On gap days, VWAP starts from the gap open. A large gap up means VWAP starts high; price may be below VWAP even if above yesterday's close. Watch for gap fill dynamics interacting with VWAP.

Yes! VWAP works well with: pivots (confluence), RSI (oversold/overbought confirmation), candlestick patterns (reversal confirmation), and market internals (TICK/ADD). Multiple confirmations increase probability.

Backtest different SD levels (1, 1.5, 2, 2.5). Track win rate and profit factor for each. Typically 1.5-2 SD balances frequency with probability. Use walk-forward analysis to avoid curve-fitting. Consider regime-specific parameters.

0.5-1% base risk is appropriate for intraday. Adjust up at extremes (2+ SD → 1-1.25% risk). Daily loss limit of 2% prevents disaster days. These are tighter than swing trading due to higher frequency.

1) Real-time VWAP calculation with bands, 2) Day type classifier (range vs trend), 3) Signal generator (band touch + confirmation), 4) Position sizer based on distance, 5) Exit manager (target, stop, time), 6) Risk manager (daily limits).

Institutions use VWAP as execution benchmark. VWAP algorithms slice large orders to execute at VWAP or better. They may buy below VWAP and sell above. Understanding this helps - institutions create support/resistance at VWAP.

VWAP shows average price; volume profile shows price distribution. When VWAP aligns with Point of Control (POC) or high volume node, it's very strong S/R. Combining them provides institutional-grade analysis.