Anchored VWAP & Intraday VWAP Trading Strategies for NIFTY & Bank Nifty

What is the Volume-Weighted Average Price (VWAP)?

VWAP represents the true average price a security has traded at throughout the day, weighted by both volume and price:

$$\text{VWAP} = \frac{\sum (\text{Typical Price} \times \text{Volume})}{\sum \text{Volume}}$$

Where $\text{Typical Price} = \frac{\text{High} + \text{Low} + \text{Close}}{3}$.

Institutional order execution algorithms (e.g., TWAP, VWAP benchmark engines) are programmed to fill multi-million-dollar orders close to VWAP. Therefore, VWAP serves as the definitive intraday line of equilibrium.

3 Core Intraday VWAP Strategies

1. The VWAP Pullback Trend Entry

Condition: Index is in a clear uptrend, trading consistently above VWAP.
Setup: Wait for price to retrace back to test the VWAP line between 10:30 AM and 01:30 PM IST.
Trigger: When a 5-minute candle touches VWAP and forms a bullish hammer or green engulfing candle, enter long.
Stop Loss: Below the low of the rejection candle.

2. The VWAP Failed Breakdown Squeeze

Condition: Price dips temporarily below VWAP on low volume, luring aggressive short sellers.
Setup: Price immediately recovers and closes back above VWAP with a surge in volume within the next two candles.
Outcome: Trapped short sellers are forced to cover, initiating an aggressive momentum pop.

Mastering Anchored VWAP (AVWAP)

While standard VWAP resets every single morning at 09:15 AM, Anchored VWAP allows traders to anchor volume-weighted calculations to critical historical market turning points:

Anchor to Union Budget / Election Day High/Low: Identifies whether the average participant from that major event is currently in profit or loss.
Anchor to the Monthly Expiry Open: Establishes the institutional benchmark price for the active monthly contract cycle.
Anchor to All-Time High / 52-Week Low: Serves as a dynamic support or resistance trendline.