If you are new to using support and resistance it’s time for a quick lesson in how this concept can really take your trading to the next level. Add in the ability for the VWAP find these areas dynamically and you are now trading with a recognizable edge in the market. Why does it work so well?
You will notice as you use the VWAP that it has a tendency to become more effective as support and resistance once the market starts to trend. What we are seeing here is that the volume is entering the market around the VWAP so it is a great tool to identify areas of buying and selling support.
This in part is caused by the institution traders who are trying to get large orders into the market around the VWAP.