hard · Order Flow Analysis
A trader sees a stacked buying imbalance zone on a 5-minute ES chart. However, the price is currently at 4560.00, while the VWAP is at 4565.00 and the +2σ band is at 4572.00.
How does the VWAP filter affect the trade decision?
- It weakens the signal because the distance to VWAP (5 points) is too small to provide a profit target.
- It invalidates the signal because you should never buy when the price is below the session average.
- It is neutral because VWAP is only relevant when the price touches the standard deviation bands.
- It strengthens the buy signal because price is below VWAP, meaning the asset is 'cheap' relative to the session average.
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