VWAP Bounce Strategy
The VWAP bounce strategy uses the Volume Weighted Average Price as dynamic support/resistance for intraday trades. Institutional traders frequently use VWAP as a benchmark, creating reliable bounce zones throughout the trading day.
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How It Works
- 1
Calculate VWAP from market open using cumulative volume-weighted price
- 2
Watch for price approaching VWAP from above (bullish) or below (bearish)
- 3
Enter on the first touch/bounce off VWAP with confirming volume and candle pattern
- 4
Set stop-loss 0.2-0.3% below VWAP for longs (above for shorts)
- 5
Target previous high of day or 1:2 risk-reward ratio
Best For
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Frequently Asked Questions
What is VWAP?
VWAP (Volume Weighted Average Price) is the average price a stock has traded at throughout the day, weighted by volume. Institutions use it as a benchmark for trade execution quality.
Why do stocks bounce off VWAP?
Large institutional traders often target VWAP to fill their orders. This concentrated buying/selling around VWAP creates a self-fulfilling support/resistance level.
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