VWAP Trading Strategy: The Second-Test Reclaim

Why VWAP is the line that matters

VWAP is where the session's business has actually been done, weighted by volume. Desks are benchmarked against it: selling above VWAP looks good on the sheet, selling below it looks bad. That incentive creates repeatable behaviour — supply gets layered above VWAP on weak days and withdrawn above it on strong days. You are not predicting anything. You are positioning around a constraint other participants have to respect. And remember who moves price: sellers control it, always. Buyers never force price up — sellers lift the offer when they see buyers coming. Read the sellers and you read the trade.

The Second-Test Reclaim (long)

The highest-quality long in the playbook. Most traders take the first test of VWAP and get chopped up. You wait for the second.

• Context: price has spent meaningful time below VWAP — at least the first 30-45 minutes — then breaks up through the line. That first break is the first test. You skip it. The first test is a coin flip fought between trapped shorts and breakout algos.
• Entry trigger: the pullback that comes back to VWAP a second time holds the line on lower volume than the first test — proof supply has thinned. Enter long when price closes back above the 9 EMA off that hold.
• Stop: a hard disaster stop a few ticks beyond the swing low of the second-test pullback. That stop is account protection only — your real exit is read off the flow.
• Target: 2-3R, at the prior session high or the upper edge of the current balance zone. Scale the first piece at 1R if supply shows up early.
• Risk sizing: fixed 0.5-1% of the account. Measure the stop distance first, then compute contracts. If the stop is so wide your risk only buys a fraction of a contract, skip the trade — skipping is a position.
• Invalidation: the second test trades more volume than the first. That is fresh supply, not exhaustion — stand down. If you are already in and sellers reclaim VWAP and hold it, you are out. No averaging, no hoping.

The mirror rejection (short)

The same read, flipped. Price is below VWAP and rallies back into the line. VWAP above a weak market is where sellers reload.

• Context: price rallies into VWAP from below and stalls at the line.
• Entry trigger: heavy volume prints at VWAP with no new high — supply is being added, not consumed. Short the break of the stall low.
• Stop: above the high of the rejection candle plus a tick or two of noise. Hard disaster stop only.
• Target: the session low or the lower balance edge; first scale at 1R.
• Invalidation: a clean close above VWAP that holds on the retest. Sellers lost the line — the short premise is dead.

When you do not trade

Price pinned on VWAP with volume drying up is chop, not opportunity. No second test, no trade. No volume tell, no trade. The setup pays because it is selective — the moment you force it in balance noise, you are the liquidity someone else is trading against.

What goes on the chart

Session VWAP, the 9 EMA, prior-day high and low, and the overnight balance zone. That is the whole chart. Every extra indicator adds a reason to talk yourself into a trade the volume does not support.

Common questions