Using VWAP for Trading: Tips & Tricks

Indicators like VWAP are the staple of day trading where traders look for market patterns to profit from. VWAP is short for volume weight average price and gives an indication of where the market is going.

Traders need to have a basic understanding of how to use VWAP indicator to be able to make informed decisions. VWAP indicators appear as curves on top of the chart, giving traders an idea of the average performance of the said stock.

The line or curve moves constantly with the chart. And the VWAP metric is updated repeatedly, keeping traders in the loop of things. You can always tweak the VWAP settings for day trading to suit your trading strategy — it’s best if you experiment a bit here and see what works best for you.

What is the VWAP Indicator

Trade VWAP operates on a calculation of market performance by both analyzing the price and the volume of the asset. The algorithm uses the average of high, low, and close, and the volume of trade at these points, to draw a curve showing how the market is performing.

You get baseline data for the market’s performance. This is represented by a curve that goes alongside the trade chart. If the trade chart moves above the VWAP indicator curve, you can see that the stock performance is going above the average, and the opposite will be true if the trade cart dips below the VWAP curve.

Best VWAP Settings for Day Trading

Now that you understand what is VWAP indicator, be sure to experiment a bit to see VWAP best settings that work for you. There’s no one-size-fits-all; be sure to work with the settings that work best for your strategy.

However, 5 to 15-minute timeframes are the best VWAP settings for day trading. Below is an image with our special xBrat VWAP predator Trading Indicator on the 5 Minute Time frame for ES Emini Futures.

vwap predator

A day trader uses VWAP indicators to assess the market performance and then makes trading decisions based on that. You first set the timeframe for the indicator, let’s say for 5 minutes, 10 minutes, or 15 minutes (or whatever fits your strategy).

As a day trader, you can use VWAP today to see how an asset performs in general and start buying and selling based on the prevalent performance.

Adding VWAP on Thinkorswim: Step-by-Step Guide

If you’re wondering “how to add VWAP on thinkorswim,” that part is also very simple:

  • Log into the thinkorswim website and set up a chart
  • Next, click the chart tab
  • After that, click a button that looks like an hourglass
  • This will open a new menu with a search bar
  • Here, type VWAP
  • When prompted, click the VWAP indicator and this will apply the indicator to your thinkorswim chart

Anchored VWAP: Definition and Strategy

If you’ve figured out how to use VWAP indicator generally, next, you’d like to move onto anchor VWAP. The anchored VWAP strategy only differs in that it has an anchor or start point with which to compare the current VWAP parameters.

You’re looking to compare the current performance with that of the anchor point. If you’re still not clear on how to use VWAP indicator in day trading, feel free to dive deeper into the topic with eBooks and guides.

However, with tools like thinkorswim, plotting a VWAP indicator on a chart has never been simpler. Taking this one step further is the xBrat VWAP Predator for Thinkorswim, which actually gives signals so that using VWAP becomes much more simpler. The chart below is the 15 minute ES Emini Futures Chart with the VWAP Predator. This indicator is revolutionising day trading with VWAP for futures, stocks, forex and even crypto.

VWAP ThinkorSwim

VWAP Day Trading Strategy: How to Use It

Hopefully, by now, we’ve answered questions like “How to use VWAP for day trading.”

Traders need to make informed decisions based on short-term market fluctuations. This means that you can’t just buy or sell the stock if you “think” that the market is headed somewhere. Instead, you can use VWAP day trading indicators to understand exactly how the market is performing and how you can benefit from it.

VWAP for day trading is as simple as things get since you don’t have to do any manual calculations. Just select the xBrat VWAP Predator Trading Indicator and the software will automatically apply it to the chart. Follwo the simple rules repeated in our training videos for the xBrat VWAP readot on the series of video >>HERE<<

Hopefully, you now understand how to get started with VWAP day trading strategy!



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