there're indeed countless ways to use a vwap:

- daily
- weekly
- monthly
- bimonthly
- quarterly
- annually
- rolling vwap
- anchored vwap
- rth
- eth
- just vwap
- midlines (bands)
- contraction / expansion display of bands
- etc

also to keep in mind, the vwap should show more or less the same value on all timeframes. the bands on the other hand could show rather big differences depending on timeframe and volatility. that of course has a lot to do with how and especially who programmed the indicator

btw a good thread about the vwap is here:

Using VWAP in your trading Lately, I've been considering taking off the only moving average on my charts -- an ema 20 -- and replacing it with a VWAP. Over the past couple months, I have outgrown one of my last "hard-fast" rules in trading, which is to only trade …

a couple of examples: (now I can test the new "drag and drop" feature for files)

- 5 day rolling vwap (no bands)

File: 5day.png:



- an anchored vwap to the last bigger swing low with contraction / expansion of the bands

File: expan.png:

I'm not a vwap pro but shouldn't your last two conditions be switched around....? If price is trading below VWAP and beyond -1st SD you can expect price to continue trading down.....not oscillate around vwap.....not sure if I have that correct but wouldn't want anyone to be messed up by the typo if it is one....thanks...perhaps you can clarify that for us please

JonnyBoy 

Here is the chart for the first hour or so on ES today. These are just simple setups. Remember this is on my own data series as time based data series just didn't do it for me. Having said that, it doesn't mean you won't get caught out intrabar thinking a setup has begun when it hasn't, but in general; - if price is trading above VWAP and beyond +1st SD you can expect price to continue up trending - if price is trading between VWAP and +1st SD you can expect price to oscillate around VWAP - if price is trading between VWAP and -1st SD you can expect price to continue down trending - if price is trading below VWAP and beyond -1st SD you can expect price to oscillate around VWAP

Volt 

I'm not a vwap pro but shouldn't your last two conditions be switched around....? If price is trading below VWAP and beyond -1st SD you can expect price to continue trading down.....not oscillate around vwap.....not sure if I have that correct but wouldn't want anyone to be messed up by the typo if it is one....thanks...perhaps you can clarify that for us please

Good catch. You are correct about the typo!

It should read:

- if price is trading above VWAP and beyond +1st SD you can expect price to continue up trending
- if price is trading between VWAP and +1st SD you can expect price to oscillate around VWAP
- if price is trading between VWAP and -1st SD you can expect price to oscillate around VWAP
- if price is trading below VWAP and beyond -1st SD you can expect price to continue down trending

JonnyBoy 

There are plenty of “trading” videos on YouTube about VWAP, but most, if not all of them are useless. This also includes the hundreds of websites and forums that essentially just repeat the same thing. Much of it is click bait. None of it is informative. In short, there are very few worthwhile sources regarding VWAP. I have a suite of VWAP setups, but you need to discover these for yourself. This means hundreds, if not thousands of hours spent in front of your chart not looking at anything else. This is the chart from yesterday. The setups are obvious (to me anyway), but in hindsight it's easy to say that. The skill is to be able to recognise them in real time. Oh and one more very important note. Never, ever pay anybody a dime to learn about VWAP. Anybody selling information about trading VWAP IMO is out for one thing, your money.

Hey Jonny,

I messed around with my charting platform (quantower) attempting to get my vwap similar to yours. I've gotten it close but still the vwap SD +1,+2,+3 aren't plotting the same. I spent about 30 mins messing with it then I realized at the top of your chart it indicates you have OrderFlow VWAP. *facepalm* .. is that something slightly different then traditional VWAP?

jakobe 

Hey Jonny, I messed around with my charting platform (quantower) attempting to get my vwap similar to yours. I've gotten it close but still the vwap SD +1,+2,+3 aren't plotting the same. I spent about 30 mins messing with it then I realized at the top of your chart it indicates you have OrderFlow VWAP. *facepalm* .. is that something slightly different then traditional VWAP?

Orderflow VWAP is just NinjaTrader's name for VWAP. In general VWAP is VWAP but depending on the resolution calculated you might get slightly different results. As an example here is my chart from yesterday.

The chart below is my "standard" setup. VWAP (and therefore the standard deviation multipliers of) are calculated on a 1 tick time frame based on my input series. This is the most accurate method to calculate. I have also added a 0.25 standard deviation band/envelope around the VWAP and SDs


The chart below is VWAP (and therefore the standard deviation multipliers of) calculated using 'standard' resolution, which essentially means it calculates based on my input series. Even though my data series is bespoke, it's underlying tick resolution is 987, which means it is calculating less often and isn't as accurate.


In the chart below I have overlaid the 'standard' resolution of VWAP with the 'tick' resolution of VWAP. The VWAP itself is pretty accurate, but the blue lines (standard deviations of) are not matching.


In the chart below I have overlaid the 'tick' resolution of VWAP with my "standard'' setup. As you can see it matches perfectly.


So other than resolution of calculation, you just need a 1x, 2x and 3x multiplier of VWAP and it should look the same.

JonnyBoy's reasonably definitive guide to VWAP - Part One

Introduction
There are very few worthwhile sources out there regarding VWAP. I have seen many YouTube videos and forum posts about VWAP, but none that really get down to brass tacks of how to trade it. I, therefore, will attempt to turn the subject of VWAP into a non-complex, digestible format across a number of parts.

My aim is to convey some VWAP setups that you can continue to study on your own. However, these setups are not a magic wand, nor a silver bullet. These setups won’t turn your trading around overnight, but, with lots of additional study and a little chart patience you should be able to successfully add these as another tool into your trading arsenal.

What is VWAP?
Simply put, the VWAP of a stock or future over a specified market period is simply this; the average price paid per share or contract during a defined period. To frame another way, it is the price of each transaction in the market as weighted by its volume.

In VWAP trading, traders attempt to buy or sell a fixed number of shares at a price that closely tracks or is better than VWAP. Very large institutional trades constitute one of the main motivations behind VWAP activity. In other words, the institutions are using VWAP to assess or benchmark how well their traders are executing transactions.

VWAP is constant. Moving averages are not.
Although VWAP is still a moving average of sorts, it is the only moving average that isn’t void of gaps. There is only one intraday VWAP which will look identical on a 30 second chart or a 4-hour chart. An RTH VWAP calculation remains constant and therefore VWAP remains the same no matter how granular your chart is.

On the contrary, we have all applied ‘stock’ moving averages to our chart, whether it be a 10 EMA, 20 SMA or a 30 HMA. Essentially, the calculation for these moving averages only looks back by the fixed period you tell it to and of course has a different calculation to VWAP. My point being that a 10 SMA will only look back 10 bars and therefore it will add all the prices together from the last 10 bars and divide them by 10. Meaning, you only have a picture from the period you selected, and it will look different across alternate time periods. ‘Stock’ moving average indicators are not constant.

An RTH VWAP encompasses the entire trading period and takes the total amount of money transacted divided by the total amount of volume that traded over the same period. VWAP is the true average price plotted over time. Most commonly the entirety of the trading day. There are many uses for VWAP; anchoring a VWAP to a swing high or swing low, using anchored VWAPs as channels, using the weekly, monthly or yearly VWAP - but let's start this guide off with the basic setups and see where we go.

Part 2 will talk about setting up your chart. I will post Part 2 within the next few days or so.

JonnyBoy's reasonably definitive guide to VWAP - Part Two

Setting up your chart
My platform of choice is NinjaTrader 8. Therefore, I am including my VWAP chart template as part of this post but I will walk us through this chart below. For those traders who use alternate trading platforms I am sure you can find a way to replicate. If you do not own a lifetime license of NT8, the chart template will not work for you because you don't have access to the Order Flow VWAP indicator. You will need an alternate way to do this or perhaps code a simple indicator yourself.

What data series should I use?
I created a customised data series based on tick data. I am not including this for two reasons. First, it was custom built by me and it took a lot of work to get it exactly how I wanted it to perform. Second, the data series is personal to every trader. What works sublime for me might be a nightmare for you. However, I must stress that the choice of data series is very important with respect to the setups and therefore will take some discovery by you to get something that feels right. This will start to make sense once you see the VWAP setups in part 3.

Walking through the chart
Below is my chart. The only indicator attached to this chart is the NinjaTrader Order Flow VWAP indicator (which is provided only for NT users who hold a lifetime license). Like many stock indicators, I had to load a number of instances of the VWAP indicator and manipulate it to get it to display what I needed. Sure, I could code, it but for now let's just use the stock indicator. Please note that VWAP is being calculated with 1 tick resolution. Refer to my post above for the notable differences between VWAP calculated with a 1 tick resolution vs. the data series resolution, or click the post link below.

VWAP for stock index futures trading? Orderflow VWAP is just NinjaTrader's name for VWAP. In general VWAP is VWAP but depending on the resolution calculated you might get slightly different results. As an example here is my chart from yesterday. The chart below is my "standard" …

VWAP on the chart
RTH VWAP is displayed as the green and red dot-dashed line in the centre of the chart.
ETH VWAP is displayed as the dodger blue and magenta dot-dashed line.
+1, +2 +3 and -1, -2 and -3 standard deviations (positive and negative multipliers of VWAP essentially)

The VWAP bands
VWAP and each standard deviation of VWAP (except for the ETH VWAP) have been "banded" with a +0.25 and -0.25 deviation envelope. These bands are critical, as they play into the setups that will be in Part 3.

VWAP Chase Band
The yellow hashed lines are what I have named the VWAP Chase Band. These hashed lines are located at +0.5 and -0.5 of VWAP and play a roll in some of the RTH VWAP setups. Essentially, you don't want to take a VWAP trade if price is beyond these lines. To frame another way, they can help you to avoid chasing a VWAP entry.

Part 3 will talk about the various VWAP setups. I might have to break this into a number of parts as I don't know how granular I will need to get.

JonnyBoy's reasonably definitive guide to VWAP - Part Three

VWAP TEST LONG SETUP

The following example is picture perfect and should be considered in a TRENDING environment. By that I mean all of the boxes were ticked in terms of this particular setup. However, as we all know even at the best of times trading is like walking around in a grey fog. There will still be valid setups that don't tick all of these boxes but are still good trades to take. Conversely, there will be times when all of the boxes are ticked but the trade just doesn't work out. You need to spend time in front of your chart analysing this and working through all of the nuances and paths that price can take around VWAP. As I have stated earlier, this isn't a silver bullet.

The VWAP TEST SHORT SETUP is directly opposite to this. Part 4 will be another TRENDING setup which looks at standard deviation continuation. Part 5 will be a standard deviation reversion setup (COUNTER TREND) and part 6 will be the VWAP cross (COUNTER TREND).

VWAP SLOPE: The slope of VWAP ideally should be sloping upwards. NinjaTrader can be customised to show positive VWAP slope in green and negative VWAP slope in red. However, a flat VWAP with little to no slope (coloured red or green) will very likely be the ‘norm’.

SETUP: Ideally, price should transition from +SD1 to VWAP (or at least come from within the +SD1 ‘’band’’) and settle within the +/- 0.25 SD of VWAP (shown here in purple). A touch of VWAP is IDEAL, but doesn’t always happen. If however price traverses more than -0.25 below VWAP, this long setup should be ignored. This doesn’t mean price won’t break back up through VWAP, but rules are rules.

ENTRY: Place a BUY STOP within the BUY ZONE. This essentially means somewhere between +SD 0.25 and +SD 0.5 and inside the VWAP Chase Band (yellow hashed line). Don’t chase your entry beyond this line.

STOP: Place your STOP within the STOP ZONE, somewhere between -SD 0.25 and -SD 0.5. Essentially the width of your stop is 1.0 SD from your entry. If you want a tighter stop use 0.5 SD from your entry.

TARGET: You can start to take off your position at T1, T2 and T3 which is essentially +SD 1 and the ‘’band’’ surrounding it. If you are still holding a position you can always trail your stop with an aim to capture a breakout. In this instance you should trail you stop with either a 0.5 or 1.0 standard deviation stop width.

BREAK EVEN: Depending on the risk tolerance of the trader you will have to determine when you move your position to break even. In some instances, price won’t make it past T1 or T2, so trade according to your risk.

JonnyBoy's reasonably definitive guide to VWAP - Part Four

STANDARD DEVIATION CONTINUTATION LONG SETUP

The following examples are picture perfect and should be considered in a STRONG TRENDING environment. By that I mean all of the boxes were ticked in terms of this particular setup. However, as we all know even at the best of times trading is like walking around in a grey fog. There will still be valid setups that don't tick all of these boxes but are still good trades to take. Conversely, there will be times when all of the boxes are ticked but the trade just doesn't work out. You need to spend time in front of your chart analysing this and working through all of the nuances and paths that price can take around +SD 1. As I have stated earlier, this isn't a silver bullet.

The STANDARD DEVIATION CONTINUTATION SHORT SETUP is directly opposite to this. Part 5 will be a standard deviation reversion setup (COUNTER TREND) and part 6 will be the VWAP cross setup (COUNTER TREND).

VWAP SLOPE: The slope of VWAP ideally should be sloping upwards. NinjaTrader can be customised to show positive VWAP slope in green and negative VWAP slope in red. A reasonably good slope is recommended in this case.

SETUP: Ideally, price should transition from +SD 2 to +SD 1 (or at least come from within the +SD2 ‘’band’’) and settle within the +/- 0.25 SD of +SD 1. A touch of +SD 1 is IDEAL, but doesn’t always happen. If however price traverses more than -0.25 below +SD 1, this long continuation setup should be ignored. This doesn’t mean price won’t break back up through +SD 1, but rules are rules.

ENTRY: Place a BUY STOP within the BUY ZONE. This essentially means somewhere between +SD 1.25 and +SD 1.5. You can add Chase Bands (similar to the ones straddling VWAP) to help you with this although these are not shown in this example. I usually gauge this by eye. Close is usually close enough.

STOP: Place your STOP within the STOP ZONE, somewhere between +SD 0.5 and +SD 0.75. Essentially the width of your stop is 1.0 SD from your entry. If you want a tighter stop use 0.5 SD from your entry.

TARGET: You can start to take off your position at T1, T2 and T3 which is essentially +SD 2 and the ‘’band’’ surrounding it. If you are still holding a position you can always trail your stop with an aim to capture a breakout. In this instance you should trail you stop with either a 0.5 or 1.0 standard deviation stop width.

BREAK EVEN: Depending on the risk tolerance of the trader you will have to determine when you move your position to break even. In some instances, price won’t make it past T1 or T2, so trade according to your risk.

ALTERNATE USE: This same setup can be replicated when price transitions from +SD 3 to +SD 2, but typically in these instances price is usually quite extended. This should only be considered on very strong trend days.

JonnyBoy's reasonably definitive guide to VWAP - Part Five

STANDARD DEVIATION REVERSION TO VWAP SHORT SETUP

The following example is picture perfect and should be considered in a COUNTER TRENDING environment. By that I mean all of the boxes were ticked in terms of this particular setup. However, as we all know even at the best of times trading is like walking around in a grey fog. There will still be valid setups that don't tick all of these boxes but are still good trades to take. Conversely, there will be times when all of the boxes are ticked but the trade just doesn't work out. You need to spend time in front of your chart analysing this and working through all of the nuances and paths that price can take around +SD 1 to VWAP. As I have stated earlier, this isn't a silver bullet.

The STANDARD DEVIATION REVERSION TO VWAP LONG SETUP is directly opposite to this. Part 6 be the VWAP cross setup (COUNTER TREND).

VWAP SLOPE: The slope of VWAP ideally should be flat, but this will be rare. Typically, a very mild slope is present. However, it should start to flatten out as price transcends from +SD 1 to VWAP.

SETUP: Ideally, price should transition from VWAP to +SD 1 to VWAP. A initial touch of +SD 1 is IDEAL, but doesn’t always happen. If however price traverses more than +0.25 above +SD 1, this short setup should be ignored. This doesn’t mean price won’t break back down towards VWAP, but rules are rules.

ENTRY: Place a SELL STOP within the SELL ZONE. This essentially means somewhere between +SD 0.5 and +SD 0.75 and just outside the VWAP Chase Band (yellow hashed line).

STOP: Place your STOP within the STOP ZONE, somewhere between +SD 1.25 and +SD 1.5. Essentially the width of your stop is 1.0 SD from your entry. If you want a tighter stop use 0.5 SD from your entry.

TARGET: VWAP is the only target in this instance. At this point we don’t know if a VWAP TEST is imminent of if this will turn into a VWAP CROSS (a cross meaning control has switched from buyers to sellers). Keeping a small position open will allow you to wait and see what transpires.

BREAK EVEN: Depending on the risk tolerance of the trader you will have to determine when you move your position to break even. In some instances, price won’t make it to T1 so trade according to your risk.