VWAP reclaim: buying back above the day's average price
In an uptrend, a close back above VWAP on rising volume suggests buyers have taken back the day's average price. How to trade it toward the 24-hour high.
Key takeaways
- VWAP is the average price paid today, weighted by volume, and many traders use it to judge who is in control.
- This setup buys a close back above VWAP, on above-average volume, while the bigger timeframe is trending up.
- The first target is the 24-hour high, so check that it is far enough away to pay for the risk.
In this article
The VWAP reclaim buys when price dips below the day's volume-weighted average price and then closes back above it, during an uptrend and on rising volume. VWAP is a rough measure of what the average trader paid today. Above it, most of today's buyers are in profit and tend to hold; below it, most are losing and some will sell. Getting back above it says buyers have won the level back. Traders use it as a simple, widely watched line for joining a trend after a pullback.
How it works
VWAP stands for volume-weighted average price. Take every trade since the start of the day, weight each price by how much traded there, and average them. Prices where a lot of volume traded pull the line toward them more than quiet prices do. In this series VWAP resets at the start of each UTC day, so early in the day it follows price closely and later it moves more slowly, because it is averaging over more trading.
Why it matters: VWAP is one of the few lines that almost every type of trader can see and agree on. Larger traders often measure their own fills against it. When price is above VWAP, the day's buying has been stronger than its selling. A dip below VWAP during an uptrend shakes out nervous buyers. If the next candle closes back above, the dip did not attract follow-through selling, and the trend can resume.
Two filters keep the setup focused. First, the bigger timeframe, the next one up from the chart you trade (1-hour for 15-minute candles, 4-hour for 1-hour, daily for 4-hour), must be trending up. That means its close is above its 20 EMA and the 20 EMA is above the 50 EMA. An EMA (exponential moving average) is an average of recent closes that gives more weight to the latest ones. Second, volume on the reclaim candle must be above its 20-candle average, a sign that traders are actually stepping in rather than price drifting back over the line on thin trade.
The rules, precisely
Traders vary these numbers. This is one precise, testable version of this strategy, written for a long trade:
- Condition 1: the bigger timeframe is trending up.
- Condition 2: the candle before closed below the day's VWAP.
- Condition 3: this candle closed above the day's VWAP.
- Condition 4: volume on this candle is above its 20-candle average.
- Entry: at the close of the candle that completes all four conditions.
- Stop: below the lowest low of the last 3 candles, minus 0.2 ATR. ATR (average true range) is the typical size of a candle over recent candles.
- Target 1: the 24-hour high.
The short is the mirror image: a bigger timeframe trending down, a close above VWAP followed by a close back below it on above-average volume, the stop above the recent highs and the 24-hour low as the target.
Where it works
- Trending days where price has spent most of its time above VWAP and dips are brief.
- Active sessions with real volume behind the reclaim candle.
- Pullbacks that start well below the 24-hour high, so there is room to run.
- Liquid coins where VWAP is watched and fills are clean.
Where it fails
- Flat days where price crosses VWAP over and over and each cross means nothing.
- Just after the daily reset, when VWAP is built from only a few candles.
- Entries close to the 24-hour high, where the target is too near to pay 1.5 R.
- Thin coins, where a single order can push price across VWAP and inflate volume.
What to check
- How old is today's VWAP? VWAP resets each day. In the first hours after the reset it rests on very little data and price crosses it easily. A reclaim later in the day, when VWAP has more trading behind it, carries more weight.
- Has price respected VWAP today? Look back over the day. If price has bounced off VWAP before, traders are using it. If it has crossed back and forth many times, the line is not doing any work and this cross is likely noise.
- Is the volume meaningful? Above average is the minimum. Compare it with the volume on the candle that dipped below. A reclaim on clearly heavier volume than the dip is a better sign than one that barely clears the average.
- Is there room to the 24-hour high? Target 1 must be at least 1.5 R away. If price is already close to the high, the trade does not pay. Look also for a swing high or the previous day's high in between, which may stop the move early.
- Is the bigger trend still intact? The EMA test can lag. Check whether the bigger chart is still making higher highs. A trend that is stalling near an old top will not support the trade for long.
- Do the fees fit? On 15-minute candles the last three lows can sit very close to the entry. With fees of 0.1% each way, they may cost at most 0.3 R. Very tight stops fail this test, and that is intended.
- What is the session? Volume in crypto rises when traditional markets in Asia, Europe and the US open. A reclaim during an active session has more participants behind it than one in a quiet overnight hour.
VWAP is only one line. If price closes back below it soon after entry, the reclaim has failed and the day's sellers are back in control. For another way to buy pullbacks in an uptrend, see the trend pullback.
Stops, targets and the time limit work the same way for every setup in this series. See managing a setup: stops, targets and the time limit.