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THE MARKET WHISPERER 23 1

multiple algorithmic platforms geared to promoting activities connected
with the VWAP price, such as the program that buys stocks when they
suddenly drop lower than the VWAP and sells them when they move above
the VWAP price.

Now that we know how the institutional traders operate, let us review
several practical ways for utilizing the VWAP in intraday trade.

Practical Applications
From our viewpoint, the VWAP indicator begins to get interesting only
after the first half hour of trading, once significant volume has already been
traded. Our starting point is that a stock being traded above the VWAP
can be expected to “return” to the VWAP. This is because institutional
traders instructed to buy the stock will not buy when its price is above
that level, and institutional traders instructed to sell receive incentives for
selling above the “fair price,” i.e., above the indicator level. The opposite
will occur when the stock is beneath the VWAP: it will receive support by
institutional traders buying “cheaply,” while on the other hand sellers will
wait for it to go over the VWAP. For us, the meaning is clear and simple: a
stock above the VWAP can be expected to drop, and a stock below it can be
expected to rise. The VWAP therefore serves as a magnetic point over the
course of the day.

Reviewing the Intraday Chart Showing VWAP for Apple, AAPL