VWAP is the session's average price weighted by volume — the truest 'fair price paid today'. Institutions benchmark their fills against it, algos work orders around it, and that self-fulfilling attention gives it two personalities: a MAGNET on balanced days, and a TREND FILTER on directional ones.
The two VWAP reads
- Reversion days: price stretches away from VWAP, momentum stalls (see Divergence), and snaps back to it — repeatedly. Fading stretches back to VWAP is the classic mean-reversion frame.
- Trend days: price rides one side of VWAP ALL day, and every pullback to it gets bought/sold. The first touch of VWAP on a trend day is one of the cleanest continuation entries in trading.
- The tell between them: on trend days VWAP itself SLOPES and price refuses to cross it. On balanced days VWAP flattens and price oscillates through it.
One question sets your whole session: is price respecting VWAP as a floor/ceiling (trend day) or orbiting it (balance day)? Answer it in the first hour and half your trade selection is done.