The 5 Types of VWAP Every Trader Should Know
Volume Weighted Average Price (VWAP) is one of the most used technical indicators available to traders. Unlike simple moving averages that treat all price points equally, VWAP calculates the average price of an asset weighted by the volume traded at each price level. This volume-weighting makes VWAP a more accurate representation of the “true” average price, as it reflects where the majority of trading activity actually occurred.
In this guide, we’ll break down the main VWAP variations.
The Five Main VWAP Variations
Standard VWAP (Intraday/Session VWAP)
The most commonly used variation, resetting automatically at the beginning of each new trading session. From the market open, it recalculates continuously throughout the day, incorporating each new price and volume data point until the session closes.
Best Use Cases:
Day Trading: Standard VWAP excels in intraday strategies, helping day traders identify whether they’re buying above or below the day’s average price
Institutional Benchmarking: Large institutions use it to measure execution quality. Buying below VWAP or selling above it indicates favorable execution
Opening Range Strategies: The first hour’s interaction with VWAP often sets the tone for the session
Mean Reversion Plays: When price deviates significantly from VWAP, traders look for pullbacks to the average
Anchored VWAP (AVWAP)
Anchored VWAP gives traders complete control over the starting point of the calculation. Instead of automatically resetting daily, AVWAP begins calculating from a specific price point, bar, or event that you manually select. This could be a major high or low, earnings announcement, economic release, breakout level, or any significant market event.
Best Use Cases:
Event-Based Analysis: Anchor to earnings reports, Fed announcements, or major news events to see how price has performed relative to volume since that catalyst
Swing Trading: By anchoring to swing highs or lows, traders can gauge whether the subsequent price action shows accumulation or distribution
Breakout Confirmation: Anchor to breakout points to determine if the move is supported by strong volume or likely to fail
Market Structure: Identify key levels where institutional players established positions and track their profitability
Strategic Advantages: AVWAP allows you to create a custom narrative for any chart. For example, anchoring to a major bottom lets you see if buyers who entered at that level are still in control. If price consistently holds above that AVWAP, it confirms strong hands accumulated at the low. If price repeatedly fails below it, those buyers may be trapped and distribution could be occurring.
Rolling VWAP (RVWAP)
Rolling VWAP operates continuously without daily resets, calculating the volume-weighted average over a specified lookback period: commonly 30, 90, 180, or 365 days. As new data enters the calculation window, the oldest data drops off, creating a constantly updating average that adapts to changing market conditions.
Best Use Cases:
Position Trading: The longer timeframes make RVWAP ideal for traders holding positions for weeks or months
Mean Reversion Strategies: Price tends to revert to longer-term volume averages, creating high-probability trading opportunities when significantly deviated
Trend Identification: When price consistently trades above a long-period RVWAP (e.g., 90-day), it confirms a sustained uptrend with continued buyer support
Cross-Market Analysis: RVWAP works well in 24-hour markets like crypto and forex where daily resets are less meaningful
Key Distinctions: Unlike Standard VWAP that resets daily or Anchored VWAP that starts at a fixed point, Rolling VWAP continuously evolves. This makes it less sensitive to single-day anomalies and more reflective of sustained volume patterns. A 365-day RVWAP, for instance, shows where the majority of volume traded over the entire past year, providing a powerful long-term equilibrium level.
Multi-Period VWAP
Multi-Period VWAP automatically anchors and resets at the beginning of standardized calendar periods: weekly, monthly, quarterly, or yearly. During the current period, VWAP calculates dynamically just like Standard VWAP. Once a new period begins, the previous period’s VWAP becomes a static level on the chart while a new calculation starts.
Best Use Cases:
Higher Timeframe Analysis: Monthly and quarterly VWAPs help swing traders identify major support and resistance zones
Institutional Levels: Many large players evaluate performance against monthly or quarterly VWAPs, making these levels self-fulfilling
Trend Confirmation: When price holds above monthly VWAP for extended periods, it signals strong institutional accumulation
Historical Reference Points: Previous periods’ VWAPs remain on the chart as fixed levels that often continue to attract price
Practical Applications: Weekly VWAP works excellently for swing traders operating on daily charts, providing a clear weekly average to gauge short-term sentiment. Monthly and quarterly VWAPs are powerful for position traders, as they represent the “fair value” according to major institutional timeframes. Yearly VWAP offers a macro perspective, showing where the bulk of annual volume transacted, especially useful for long-term investors assessing entry points.
VWAP with Standard Deviation Bands
VWAP with bands enhances any VWAP type by adding standard deviation channels above and below the core average. Typically, traders use ±1 and ±2 standard deviation bands, though ±3 bands can be added for extreme volatility scenarios. These bands measure how far price has deviated from the volume-weighted average, providing a statistical framework for understanding overextensions.
Best Use Cases:
Volatility Assessment: The width of the bands shows current volatility levels. Wider bands indicate higher volatility, narrower bands suggest consolidation
Overextension Identification: Price reaching ±2 standard deviations suggests an extreme move that may be unsustainable
Mean Reversion Entries: When price touches or exceeds the outer bands, traders look for reversals back toward VWAP
Trend Continuation: In strong trends, price may “walk the band,” repeatedly touching +1 SD in uptrends or -1 SD in downtrends
Breakout Validation: Strong breakouts often push through +1 SD with conviction; weak breakouts fail to maintain that distance
Strategic Framework: The bands create zones rather than single levels. Price between VWAP and +1 SD is in a normal bullish state. Between +1 and +2 SD signals extended bullish conditions where profit-taking often occurs. Beyond +2 SD represents statistical extremes where mean reversion becomes highly probable. The same logic applies inversely for bearish conditions below VWAP.
Combining VWAP Types for Maximum Edge
The real power of VWAP emerges when you layer multiple types together. For instance, using Standard VWAP for intraday timing while simultaneously referencing Monthly VWAP for higher timeframe context creates a multi-dimensional analysis. You might look for long entries when price holds above Monthly VWAP (confirming the monthly trend) and pulls back to test Standard VWAP from above (offering an intraday entry).
Similarly, combining Rolling VWAP with bands creates a robust mean reversion system. When price reaches -2 SD on a 90-day RVWAP in an established uptrend, it often presents a low-risk buying opportunity with the expectation of reversion to the average.