Rolling VWAP vs Rolling Pivot Levels as Trend Filters

We‘ve all heard the saying that “the trend is your friend, until it isn’t”. In this post, we’ll look at how Rolling VWAPs and Pivot levels can help us determine the trend. There are of course a variety of ways for defining the trend. The most common approach is simply comparing a number of recent highs and lows. An uptrend will have higher highs and higher lows. A downtrend has lower highs and lower. Finally, a set of horizontal highs and lows, point to a sideways trend.

Swing Trend Analysis

Next, we’ll want to distinguish between near-, intermediate- and major trends. Traditionally, anything more than 6 months was considered a major trend. Anything between 3 weeks and 3 months was considered intermediate, and near term trend is anything less than 3 weeks.

As day-traders however, we can consider something as short as a 2-3 day move a major trend. The intermediate will then be a few hours and we may look to time entries with for example a 5 min chart. Alternatively, one may also use a low resolution renko, range, tick or volume chart. A trend following approach will then focus on aligning major with the intermediate trends. You will use the near term perspective to time the entries. In an uptrend, a near term trend “correction” or retracement will be used to locate long entries.

Pivot Levels from the Regular vs. Overnight Session

An important issue to consider when determining trends in the futures markets is that we’re faced with two main trading sessions. These are the Regular Trading Hours Session (RTH) and the Night Session. Of course, there’s also the Evening Session, however, when talking about trends, it is not relevant. We’ll therefore focus on the Regular and the Night sessions, as they account for more than 95% of the price data. Additional details on the distinction was discussed in this post.

Swing Trend Analysis: Regular Session vs. Full Session

For index, interest rate futures and certain commodities, there will be considerably more volume during hours when the local traders are active. As a general rule, they are driven by a local bias, based on the exchange where the contract is traded. For example, with the E-minis index futures one should determine trends based on the underlying equities in the U.S. stock market. These companies are traded during the RTH session (8.30 AM – 3.15 PM, Central Time).

Rolling Pivot Levels and Volume Analysis

Overnight Price Echo

The price moves that occur during the Night Session is mainly an echo of Asian and European markets. In most cases, this information will not be accurate for determining major and intermediate trends for the U.S. equity market.

Therefore, new swing high and lows that includes both Regular and Night Sessions may be misleading. We encounter the same problem using a moving average, or other indicators that include the low-volume Night Session in its look-back period (such as the ADX for example). Two thirds of the price-data will include information not produced by the underlying assets! The alternative, omitting the Night Session data altogether will produce price gaps and likewise, inaccurate trend analysis.

Regular Session Gaps

Calculating Rolling Pivot Levels

One way of avoiding this is by working with a rolling pivot level calculation. This approach was suggested by Mark B. Fisher in his book The Logical Trader. We then take the highest high, lowest low of the past 3 days and the close/settlement of the current Regular Session. If the market trades above this level, we’re in an uptrend. If it trades below, we’re in a downtrend. Your ideal trade will be in the direction of the major trend when the market retraces towards the value area. The value area is displayed as the 3 day rolling pivot range. A Pivot Range is comprised of the Directional Pivot (DP), Central Pivot (CP) and the Main Pivot (PP).

Zig-Zag with Rolling Pivot Levels

The Rolling VWAP

You may apply the Rolling Volume Weighted Average Price calculation in a similar fashion. We then use a moving window of the accumulated VWAP over for example the past 3 days. This way, one may compare where price is moving in relation to todays 3day rolling average. You may also review where where the 3 day rolling average was located 1 and 2 days ago. Again, if the price is moving above the rolling average, we’re in an uptrend. If it is below, we have a downtrend. Your ideal trade entry is in the direction of the major trend when the market retraces towards the value area as represented by the 3 day rolling 1st standard deviation bands.

For the rolling VWAP, we use price data from the entire ETH session (Regular, Evening and Night Session) as the low volume Sessions will have very little impact on the accumulated average.

Rolling VWAP Trend

For the rolling VWAP, we use price data from the entire ETH session (Regular, Evening and Night Session) as the low volume Sessions will have very little impact on the accumulated average.


To sum up, one may be in a better position to get accurate trend information when using rolling Pivot levels and VWAPs. You may easily isolate the RTH session by using our premium Session Pivots. Additional information on our premium suite is available here. For additional trading resources, you may review the full Indicator Library at