I’ve recently made a BIG change in my trading…
It just goes to show that even after 25 years of trading, it’s good to keep an open mind.
I spent years learning everything possible about trading and the stock market.
From company fundamentals and sifting through SEC filings, to complex technical indicators.
But I’ve always found it best to keep things simple with my own trading.
Until recently, I didn’t even use volume-weighted average price, or VWAP.
But for me, right now…
VWAP is sacrosanct.
This is important, especially for beginners…
To Keep It Easy, Do Not Buy Stocks When They Fail At the VWAP
Trading isn’t easy, okay? So don’t get the wrong idea when I say this…
Life is too short for a stock that cannot hold the VWAP (especially in the beginning).
I’ve always traded based on price action.
What I was seeing on the chart, or Level 2, was much more important than technical indicators.
So, for some of you, this will be different from what I’ve said in the past.
Before we look at examples, a quick refresher…
What is VWAP and why should you care?
VWAP is similar to a moving average except that it gives more weight to prices with higher trading volume.
For example, FingerMotion Inc. (FNGR) was a big runner…
Source: Stocks To Trade
FNGR, 8/28/26, use VWAP to understand who’s in control.
It’s easy to see from the FNGR chart above when VWAP moved up based on both volume and price.
The more shares that get bought or sold at a specific price, the more that price affects the final average.
How Is VWAP Calculated?
VWAP is the stock’s average price for the day, based on how many shares were bought and sold, and how much they cost.
So, if more shares were bought at $2 than at $1.50, the VWAP would be closer to $2.
The cool thing is, you don’t need to calculate it or even fully understand the formula.
All you need to know is that if a stock is above VWAP, buyers are in control.
Likewise, if the stock is below VWAP, sellers are in control.
You could go so far as to say anything above VWAP is bullish and anything below VWAP is bearish.
Understand that some of these plays can reclaim VWAP after they’ve dropped below.
For example, check out ClearOne Inc. (CLRO)…
Source: Stocks To Trade
CLRO, 8/5/26-8/6/26, 1-min candles, after-hours VWAP reclaim.
If you want to make your life easier, put VWAP up on your chart.
Then, just don’t buy stocks that are below it (especially beginners).
But also…
Don’t chase stocks that are too far up above it.
Look at the Xpion360 Inc (XPON) chart below…
Source: Stocks To Trade
XPON, 8/21/26-8/28/26, 1-min candles, overextension beyond VWAP.
That chart shows the risk of buying once a stock is too far above VWAP…
VWAP Is a Double-Edged Sword
If a stock is way below VWAP, you know that everybody who bought it that day is underwater. There’s going to be a lot of resistance.
If it’s way above VWAP, you know a lot of people are in the money. They’re probably going to start selling soon.
VWAP is a momentum indicator.
If you want to increase your odds, you buy a stock that has momentum. You don’t buy a stock that doesn’t have momentum.
“But Tim, what about those VWAP reclaims?”
They do happen, but it’s pretty low odds.
For example, Quoin Pharmaceuticals Ltd. (QNRX) was a huge premarket spiker last Friday.
But once it dropped below VWAP…
QNRX, 8/28/26, 1-min candles, couldn’t reclaim VWAP.
It could never reclaim VWAP.
Why?
Pay attention, because this is SUPER important in the current market environment:
The reason VWAP reclaims are less likely right now is because there’s usually another play on another stock.
Full-time traders tend to go where there’s volatility and volume.
This is especially true in the afternoon when the morning action is already over.
If a stock is below the VWAP or dropping below the VWAP into the close, it’s less likely.
Notice I didn’t say never? Anything can happen, right?
For example … stocks can bounce and shorts can get squeezed.
On August 19, BTC Digital Ltd (BTCT) looked like it was dropping through the VWAP going into the close…
BTCT, 8/19/26, 1-min candles, VWAP bounce and short squeeze.
Instead, BTCT held and then squeezed short sellers. Who shorts a $1 stock? Only degenerates!
How To Practice Using VWAP
I encourage you to watch live price action as much as possible.
It’s the best way to understand how fast these plays can move.
So, put VWAP on your chart and watch the price action play out in real time. Soon you’ll see why it’s such an important indicator.
I never thought I’d say this…
Use VWAP to make your life easier.
In the beginning, you don’t want to take extra risky, extra choppy, extra difficult trades.
You want to take it easy on yourself (ideally, you want to go for the gimme).
Is everything above VWAP a gimme? No. But for me, personally, if I were a newbie, I would not be buying under VWAP.
Now and then you’ll see me try a VWAP reclaim (and it’s fun).
But when it fails, it tells me the VWAP is even more important.
If you have any questions, email me at SykesDaily@BanyanHill.com.
Cheers,
Tim Sykes
Editor, Tim Sykes Daily
