VWAP (Volume Weighted Average Price) stands for Volume-Weighted Average Price. In forex trading, it’s used to measure the average price of a currency pair weighted by trading volume over a specific period (usually intraday).
Even though forex is decentralized (no single central exchange volume), many brokers and platforms like MT4/MT5 provide tick volume–based VWAP, which still works well for intraday analysis.
📊 What VWAP Is Used For in Forex
1️⃣ Intraday Trend Direction
VWAP helps traders see whether price is trading:
Above VWAP → bullish intraday bias
Below VWAP → bearish intraday bias
Example:
If EUR/USD is trading above VWAP during London session, buyers are in control for that session.
2️⃣ Dynamic Support & Resistance
VWAP often acts as:
📌 Support in uptrends
📌 Resistance in downtrends
Price frequently pulls back to VWAP before continuing the trend.
3️⃣ Fair Value / Institutional Benchmark
VWAP shows the “fair price” for the day.
Institutional traders often aim to:
Buy below VWAP
Sell above VWAP
If you trade with larger lot sizes (like on platforms such as Exness), VWAP can help avoid entering at overextended prices.
4️⃣ Scalping & Session Trading
VWAP works best for:
London session trading
New York session trading
Intraday scalping
It resets daily, so it's not ideal for long-term swing trading.
5️⃣ Mean Reversion Strategy
If price moves too far away from VWAP:
It may revert back toward VWAP
Traders use VWAP bands (like Bollinger Bands around VWAP)
📌 Simple VWAP Trading Setup Example
Buy Setup:
Price above VWAP
Pullback to VWAP
Bullish confirmation candle
Stop below VWAP
Sell Setup:
Price below VWAP
Pullback to VWAP
Bearish confirmation
Stop above VWAP
⚠️ Important Notes for Forex Traders
Forex VWAP is based on broker volume, not centralized exchange volume.
Works best on lower timeframes (M1–H1).
Should be combined with:
Market structure
Session timing
Support/resistance
RSI or MACD confirmation
🎯 Who Should Use VWAP?
✔ Scalpers
✔ Day traders
✔ Traders who follow institutional flow
❌ Long-term swing traders
