How to Use a VWAP Indicator & Strategies to Day Trade Crypto (2024)

FAQs

Does VWAP work for crypto? ›

VWAP (Volume-Weighted Average Price) is a trading indicator that calculates the daily average price for Bitcoin (BTC) and other cryptos. VWAP resets on the daily and helps traders buy below the average price and sell above the average price.

One of the most commonly used indicators for day trading amongst retail and professional traders alike is the Volume-Weighted Average Price (VWAP). The reason that the VWAP indicator is so widely used is that it merges the two most important factors in technical analysis: price and volume.

Typical Timeframes

A 5-minute or 15-minute VWAP is typical when trading intraday to illustrate the trend.

The VWAP keeps the running total of the volume and price information aggregated throughout the day to give the current VWAP in real time. This indicator is calculated for any time period to show the VWAP for every data point in an intraday stock chart.

If the price is above VWAP, it is a good intraday price to sell. If the price is below VWAP, it is a good intraday price to buy. However, there is a caveat to using this intraday. Prices are dynamic and what appears to be a good price at one point in the day may not be by day's end.

Win Rate: 79.57%

Swing and position traders use the VWAP in the same way as a moving average. For example, they may look for crossovers between the VWAP and the stock price, either as a trading signal or simply as one variable within a larger trading system. You've come a long way. This will get you even farther!

This should provide you with three lines — the upper deviation band is essentially an overbought level, and the lower band is an oversold level, both plotted a specified number of standard deviations (based on the difference between the stock price and VWAP) above VWAP, which is the middle line (in purple above).

VWAP on a chart

The day trader can also include pre-market VWAP calculations at their discretion, but some traders prefer not to enable it until after market opens. Since VWAP is an intra-day indicator, traders are looking to apply it to smaller scaler trends instead of larger.

What color should the VWAP be? ›

The GSAT shortfall algorithm (called 4Cast) performs better than the VWAP algorithm when short-term (ST) alpha is high, reducing ST alpha loss. The 4Cast algorithm also delivers lower execution risk.

This is the only difference between VWAP and Anchored VWAP. The regular VWAP indicator incorporates volume and price to calculate a weighted average. While the VWAP calculation is possible only for one day, Anchored VWAP can be calculated for days, weeks, months, and years.

The best day trading strategy is the Market Opening Gap strategy. As its name indicates, day trading refers to a strategy in which a trader opens and closes positions in a particular trading vehicle during the day but generally doesn't hold any positions overnight.

Scalping is one of the most popular strategies. It involves selling almost immediately after a trade becomes profitable. The price target is whatever figure means that you'll make money on the trade.

MACD - Moving Average Convergence/Divergence

Several indicators in the stock market exist, and the Moving-Average Convergence/Divergence line or MACD is probably the most widely used technical indicator.

The VWAP is a trading indicator, which averages the closing prices during the given time period. At the same time, it puts emphasize on the periods with higher volume. In this manner, the Volume Weighted Average Price is a lagging indicator, because it is based on previous data.

VWAP, or Volume Weighted Average Price, is the average price of an asset over a set period of time, weighted by volume. Just like OHLCV data, VWAP is an aggregated form of trade data. It's a useful indicator to eliminate noise in price movements for a given timespan.

Binance - VWAP Trade Data

Just like OHLCV data, it is an aggregated form of trade data. As the term implies, VWAP weighs the price against the volume. It's a useful indicator to eliminate noise in price movements for a given timespan. We provide VWAP data for the same timeframes as our OHLCV data.

Note: You cannot apply the VWAP technical indicator to Price Distribution and Tick charts. VWAP applied to a spread chart is based on price updates to the spread chart.

What can VWAP tell you? ›

The volume-weighted average price (VWAP) is a measurement that shows the average price of a security, adjusted for its volume. It is calculated during a specific trading session by taking the total dollar value of trading in the security and dividing it by the volume of trades.

Importance of Volume Weighted Average Price

The market is bearish when the price is below the VWAP and bullish if the price is above the VWAP. During a bullish market, there will be an increase in the buying price, and the trend line on the chart will move upward.

This should provide you with three lines — the upper deviation band is essentially an overbought level, and the lower band is an oversold level, both plotted a specified number of standard deviations (based on the difference between the stock price and VWAP) above VWAP, which is the middle line (in purple above).

This is the only difference between VWAP and Anchored VWAP. The regular VWAP indicator incorporates volume and price to calculate a weighted average. While the VWAP calculation is possible only for one day, Anchored VWAP can be calculated for days, weeks, months, and years.

Best Tick Chart for Emini day trading

The three best Tick Charts for Emini day trading are the 500 Tick, 1,500 Tick and 4,500 Tick Charts. I use these in my multiple time frame (MTF) analysis of the Emini. The lowest timeframe (500 Tick) is great for timing an entry or exit.