VWAP (Volume Weighted Average Price) is the average price of a security weighted by volume. It resets at the start of each trading day (9:15 AM IST) and accumulates throughout the session. Institutional traders use VWAP as a benchmark — trades below VWAP are considered favourable for buyers and vice versa.

VWAP Formula VWAP = Σ(Typical Price × Volume) ÷ Σ(Volume) Typical Price = (High + Low + Close) ÷ 3

Why VWAP Matters on NSE

Large institutional orders (FIIs, mutual funds) are often executed relative to VWAP. When institutions want to buy, they prefer prices below VWAP. This creates consistent support at VWAP on high-volume stocks.

In NSE intraday trading, VWAP is the single most important reference level. The majority of short-term price action during the session revolves around the VWAP.

VWAP Trading Strategies

Strategy 1 — VWAP Bounce (Mean Reversion)

Buy: Price pulls back to VWAP from above + RSI between 40–50
Sell: Price reaches the previous high or 1% above VWAP
Stop Loss: 0.5% below VWAP
Best on: NIFTY 50, BANK NIFTY intraday (15min chart)

Strategy 2 — VWAP Breakout

Buy: Price was below VWAP, crosses above with high volume
Sell: End of day or when price falls back below VWAP
Stop Loss: Below VWAP
Best for: High-volume stocks in strong trending days

Strategy 3 — VWAP as Trend Filter

Only take long intraday trades when price is above VWAP
Only take short intraday trades when price is below VWAP
Combine with: EMA crossover or RSI signal on 5-minute chart

VWAP Bands (Standard Deviation Bands)

Adding standard deviation bands to VWAP creates VWAP Bands — similar to Bollinger Bands but volume-weighted:

  • +1 SD / −1 SD bands → 68% of price action stays within these
  • +2 SD band → Strong resistance / overbought intraday
  • −2 SD band → Strong support / oversold intraday

VWAP Limitations

  • Intraday only — VWAP resets daily and is not useful on daily/weekly charts
  • Less effective on low-volume stocks — institution footprints are absent
  • On gap-up/gap-down days, VWAP starts far from previous close and loses context early in the session
Check if the day is a trending day or range day in the first 30 minutes. On range days (both sides of VWAP get tested), the bounce strategy works better. On trending days, the breakout strategy works better.