How to trade banknifty options using vwap

In this blog you will learn about how to trade banknifty options using vwap, in simple words and beginners friendly stay tuned for more information.

Banknifty Vwap strategy

Banknifty Vwap strategy.

What is Vwap?

Vwap – volume weighted average price.

Shows the average price weighted by volume during the day. If it acts as an institutional benchmark –

Meaning -;

• Big trades buy below Vwap it is a discount zone.
• And sell above Vwap it is a premium zone.

So, Vwap helps you find whether the market is in buying or selling control.

Step by step: Trading banknifty options using vwap.

1. Setup chart.
   • Time frame: 5- minute or 15- minute .
   • Indicator: Vwap Built-in in trading view, zerodha or upstox etc
2. Identify the trend using vwap.
   • Price above Vwap – bullish sentiment
   • Price below Vwap – bearish sentiment.
   • Wait for a clean breakout and candle closing above/ below Vwap, not just a weak touch.
3. Entry logic
   • For call option – buy side.
   • Price crosses above Vwap with a strong bullish candle.
   • Retests Vwap and bounces.
   • Volume confirms.
4. Exit Plan
   • Target 1:2 risk reward ratio for example – 20 point sl then – 40 – point target.
   • Or exit the next support level or resistance level.
   • Stoploss: Just below Vwap – for call  – Just above Vwap – for put
5. Avoid choppy zones.
   • Skip trades when.
   • Price keeps moving around Vwap – it means – no clear direction.
   • When Vwap is flat.
   • No volume confirmation.
6. Example trade – Intraday setup
   • Banknifty below Vwap.
   • Retest Vwap+ rejection candle.
   • Sl above Vwap.
   • Exit at the next support.

Is the single Vwap indicator enough for banknifty option trading.

In reality

→ Single Vwap alone is not enough for consistent banknifty option trading. It’s powerful but it must be confirmed with other factors like trends , volume, and momentum .

Why Vwap alone isn’t enough

1. Vwap gives you trend direction+ fair value but .
   • It doesn’t show momentum strength – false breakouts are common.
   • It can lag a bit in fast – moving Markets like banknifty.
   • It doesn’t show entry timing – only zones – above/ below Vwap.

→The ideal combo for accuracy The ideal combo for accuracy.

1. Vwap – trend filter
   • Price above Vwap – bullish signal look for call.
   • Price below Vwap – bearish signal look for put.
2. Support resistance – price action.
   • Use support resistance for exit or stoploss.
   • Avoid trades in the sideways market.
3. Use a strong candle – price action
   • Healthy bullish candle with Vwap → confirms buy setup.
   • Healthy bearish candle with Vwap → confirms put setup.

When Vwap works alone.

Vwap can be used alone only when.

• The trend is strong and clean with no sideways action.
• You trade retest entries with strict sl.
• You have price action confirmation of strong candles, volume.

Otherwise, false breakouts can easily hit your stoploss.

Market type.                    Vwap alone

Trending.                          Works well

Sideways.                           Traps easily

What’s the plus point of the Vwap indicator.

→ top plus point of Vwap indicator:

1. Shows true market direction → Smart money trend.
   • Vwap is not just an average it’s volume weighted so it tells you where most institutional money is active.
   • If the price stays above the Vwap buyer dominates
   • If the price stays below Vwap sellers dominates
   • You trade with the market actual flow not against it.
2. Acts as dynamic support and resistance.
   • Vwap moves with price and acts like a magnet – price often bounces from or rejects Vwap.
   • Great for retest entries buy near Vwap in uptrend sell near Vwap in downtrend .
3. Works well on all timeframes
   • Especially effective on 1- min /5 – min chart for intraday and 15- min / 1- hr for positional trading.
   • You can even anchor Vwap from a specific Swing high/ low for precision.
   • Flexible tool that adapts to your trading style.
4. Easy trend filter
   • Instantly shows bias .
     • Price above Vwap – focus on call.
     • Price below Vwap – focus on put.
   • Avoid emotional or random trades.

If this strategy makes sense to you give your feedback in comments.

In the next blog i will share about the top 5 scalping for beginners Stay tuned.

At the end of the day

trading isn’t about timing in the market it’s about time in the market.

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