VWAP Algo Trading Strategy
Understanding VWAP execution reveals hidden intent — and trading opportunity.
VWAP isn’t just some random line on a chart.
It’s how big players move serious size, without lighting up the tape.
According to BestEx Research, 72% of institutional traders use VWAP algos for low-urgency orders.
Why?
Because the job of a VWAP algo is simple:
Fill the order at or better than VWAP.
Let’s break this down…see if we can find some edge here
VWAP EDGE
Picture this…
You’re an algo with 10,000 contracts of Nasdaq futures to sell.
You can’t just slam the market, right? That would cause massive slippage.
But NQ trades ~400k contracts a day, so if you slice it up, feed it slowly, and follow the volume, you might just get it done quietly… and at a good average price.
So you load the sell order into a VWAP algo.
Now… let’s zoom in.
The Turning Point
The algo’s been working the order all morning.
Filled ~35% of the size.
VWAP is sitting nicely below the current market.
Life is good.
But there’s a problem:
The clock’s ticking, and price is drifting too far above VWAP.
From the algo’s point of view:
“I’m ahead of schedule and getting better-than-VWAP fills. Great.
But I still have 65% left. Anything can happen.
Let’s get moving before this slips away…”
So it starts selling more aggressively:
Hitting bids. Working harder. Getting filled faster.
Other algos with similar orders start doing the same.
And then? Selling pressure increases The market starts to roll Price magnetises back to VWAP
Not because the buyers vanished…
But because the bots are doing their job.
When Price Meets VWAP Again…
The aggressive selling slows.
The algo calms down.
And …
Buy-side VWAP algos might now see price as attractive.
So they quietly start working their orders too…
Adding subtle buying pressure right where the sell-side was just active.
So what’s the takeaway for us?
Understanding how and why VWAP algos behave gives you a real edge.
- It explains those repeatable mid-day rolls.
- It offers clues on hidden intent.
- It helps you build plays around their behaviour.
My “6 o’clock shock” strategy is built on this exact idea, riding the curl in price as the VWAP algos kick into more aggressive gear.
Watch the video [here].
Even if that play is not your thing, I think understanding the motivation and behaviour of ‘big money’ can really help you identify edge…
Enjoy the rabbit hole 