VWAP trading strategy for forex and gold
What is VWAP?
VWAP stands for volume weighted average price. It's the average price the market has traded at, with more weight given to prices where more volume went through. Think of it as where the average trader is positioned. Price above VWAP means buyers are in control. Below it, sellers are.
My VWAP strategy, step by step
- Find the strongest pair. I look for the strongest currency against the weakest, so I'm trading the pair with the clearest trend.
- Know the trend. Higher highs and higher lows for buys, lower highs and lower lows for sells. If there's no trend, there's no trade.
- Wait for the pullback to VWAP. I don't chase. I wait for price to come back to value.
- Confirm with volume profile. If a high-volume level lines up with VWAP, that's a stronger spot. See volume profile.
- Set the stop and target, then let it run. Stop beyond the level, target at the next volume area, and avoid fake breakouts by waiting for confirmation.
Common VWAP mistakes
- Trading every touch of VWAP, even when there's no trend.
- Chasing price far away from VWAP instead of waiting for value.
- Ignoring volume, which is the whole point of VWAP.
- Moving the stop because the trade's going against you.
Watch the full walkthrough in the video above, then see the strategy in action every day in the free Telegram. My TradingView and MT5 indicators are built around it.
Common questions
What does VWAP stand for?
Volume weighted average price. It's the average price traded over a period, weighted by the volume at each price.
Does VWAP work in forex?
Yes. Spot forex has no central exchange, so VWAP uses your broker's tick volume or futures volume as a proxy. It's still a useful guide to where value and the average position sit.
Is VWAP good for gold trading?
Yes. Gold (XAUUSD) trends well in the London and New York sessions, and pullbacks to VWAP often give clean entries in the direction of the trend.
What's the best timeframe for VWAP?
I use it intraday, mainly through the London and New York sessions, and step back to higher timeframes to confirm the trend.