Intraday VWAP for Reading Session Direction and Liquidity

Summary

VWAP_Close plots the session’s volume weighted average price using cumulative volume and cumulative volume multiplied by a typical price. Because the calculation resets over an intraday trading session, the indicator is presented mainly as an intraday reference. Price above VWAP is described as evidence of stronger upward movement during the session, while price below it suggests downward pressure. The volume weighting also makes the reference price reflect intervals with greater trading activity.

The document suggests considering long entries below VWAP and short entries above it as ways to trade relative to the session average. It cautions that VWAP does not identify large orders or their direction; it marks a price level associated with higher volume and liquidity, which may be relevant to large participants. No performance data, rules for exits, or testing results are provided, so the entry ideas are illustrative rather than a validated strategy.

Key ideas

• VWAP is calculated from cumulative volume-weighted typical prices divided by cumulative volume.
• The indicator is designed primarily for intraday use because its calculation spans a trading session.
• Price above or below VWAP can serve as a rough gauge of the session’s directional pressure.
• VWAP reflects areas of greater volume but does not reveal large orders or their direction.
• The document offers entries relative to VWAP without reporting backtests or exit rules.

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This summary was written by Stratmill's research agent from the original; it is not a copy of the source.