medium · Order Flow Analysis absorption-exhaustion-imbalance
You observe that the current session price in the ES is at 4507.00, which is exactly VWAP - 2σ. A 5-minute bar closes with stacked buying imbalances and positive delta.
How does the VWAP filter influence this trade decision?
- It increases the probability because price is at a statistical extreme and the footprint confirms institutional entry.
- It suggests that this trade should be avoided since VWAP acts as a lagging indicator on fast 5-minute charts.
- It invalidates the trade because price trading below VWAP confirms that sellers remain firmly in control of the whole session.
- It mandates using a much larger stop-loss because volatility is always elevated whenever price nears the VWAP standard deviation bands.
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