The VWAP fade strategy is when traders take the opposite side of the move after a strong push away from the VWAP line. If the price moves too high above VWAP too fast, traders expect it to come back down. If it drops too low, they expect it to bounce back up. It is called a “fade” because traders expect the move to lose strength and return to VWAP.

How Does the VWAP Fade Work?

VWAP fade works by watching how far price moves from VWAP. When price goes too far, traders expect it to pull back. For example, if a stock shoots up 3-4% above VWAP early in the day without support from volume, traders may go short expecting the price to fall back to VWAP. The same logic applies if the price falls sharply below VWAP.

When Should You Use VWAP Fade Strategy?

Use VWAP fade when there is a sharp price move away from VWAP in the first half of the trading day. It works best in range-bound or non-trending markets. Avoid using it when markets are trending strongly in one direction, because in such cases, price may not return to VWAP quickly or at all.

What Are the Entry and Exit Points in VWAP Fade?

You can enter a fade trade when the price is 2-3% away from VWAP and starts to reverse. Look for a confirmation candle or volume drop. For exit, target is near the VWAP line. Place stop-loss just above or below the extreme point of the price spike. Keep risk small and reward clear.

Is VWAP Fade Strategy Good for Beginners?

Yes, but beginners must be careful. VWAP fade looks easy, but it needs practice. Only use it when the market is flat or not trending. Always confirm with volume, candlesticks, or support/resistance. Practice first in a demo account before using real money. Risk control is very important with this strategy.

What Tools Help in VWAP Fade Strategy?

Use 1-minute or 5-minute charts along with VWAP lines. Combine it with RSI to check overbought/oversold conditions. Look for volume indicators to confirm reversal strength. Price action like pin bars, doji, or engulfing candles can also give signals. These tools help increase accuracy of VWAP fade entries.