Profits from trading around volume-weighted average price
| Strategy Type | VWAP / Institutional Benchmark |
| Market Outlook | Profits from trading around volume-weighted average price |
| Risk Profile | Moderate - clear benchmark provides reference |
| Reward Profile | Consistent intraday profits (15-60+ points) |
| Time Horizon | Intraday (resets daily) |
| Iv Environment | N/A - Futures/Index based |
| Breakeven | Win rate × Avg win > Loss rate × Avg loss |
| Primary Instruments | FTSE 100 Futures, UK100 CFD, DAX Futures |
| Mas Compliance | MAS regulated brokers required for futures/CFD trading |
| Trading Hours | VWAP builds during session; trade 4 PM - 12 AM SGT |
| Contract Size | FTSE 100 Futures: £10 per point; Mini: £2 per point |
| Settlement | Cash settled; VWAP resets each session |
| Tax Treatment | No capital gains tax for individuals in Singapore |
| Margin Requirements | Standard margin for day positions |
| Cdp Account | Not required for futures/CFD; custody with broker |
| Singapore Relevance | VWAP ideal for Singapore - institutional benchmark visible during London/US sessions, clear mean reversion and trend signals |
Volume Weighted Average Price = Σ(Price × Volume) / Σ(Volume). The average price weighted by volume traded. Shows where most transactions occurred - the true average transaction price for the session.
VWAP is the institutional benchmark for execution quality. Many algos and traders reference it, making it self-fulfilling S/R. It shows fair value and creates mean reversion opportunities.
Standard deviation bands around VWAP show price extension. 1 SD = Normal range (~68% of volume). 2 SD = Extended (~95%). At 2 SD, high probability of mean reversion back to VWAP.
Session VWAP resets at the start of each trading day. It builds cumulatively through the session. Anchored VWAPs don't reset - they start from your chosen point.
Mean reversion: Fade at SD bands, target VWAP. Trend following: Buy pullbacks to VWAP in uptrend, sell rallies in downtrend. Check VWAP slope first to determine strategy.
VWAP calculated from a specific anchor point (swing high/low, news event, earnings) rather than session start. Shows average price since that significant event. Useful for swing trading.
Strong positive: Uptrend - buy pullbacks. Strong negative: Downtrend - sell rallies. Flat: Range day - mean reversion at bands. Slope determines which strategy to use.
Price crossing above or below VWAP. Bullish cross (above) signals potential uptrend. Bearish cross (below) signals potential downtrend. Confirm with close beyond VWAP and volume.
Don't mean revert when VWAP is strongly trending (steep slope), on trend days, during news events, or in the first 30-60 minutes when VWAP isn't established.
Opening: VWAP volatile, be cautious. Morning: VWAP establishing, watch for direction. Mid-session: VWAP stable, best trading. Late: VWAP mature, strong mean reversion.
As execution benchmark. VWAP algos slice large orders through session proportional to volume profile. Goal: Execute at or better than final VWAP. Creates predictable flow patterns.
Using session, weekly, monthly, and anchored VWAPs together. Where multiple VWAPs align = Very strong level. Higher timeframe VWAPs are more significant. Trade confluence zones.
Absorption at VWAP (bids/offers refreshing), delta in your direction, tape slowing at level confirms VWAP holding. Trade only when flow confirms the VWAP level.
Backtest 1+ year: Test band multipliers, slope thresholds, confirmation requirements. Walk-forward test. Typical optimal: 1.0 SD for first band, 0.5-0.75 SD for reversion threshold.
Analyzing performance by VWAP slope regime. Mean reversion works on flat VWAP (range days). Trend following works on trending VWAP. Detect regime and apply appropriate strategy.
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