VWAP bands are standard-deviation envelopes plotted around VWAP — typically at 1σ and 2σ above and below. They measure how stretched price is from the volume-weighted mean: near VWAP is fair value; out at the 2σ band is statistically extended. That stretch is the signal.

Reading the bands

Price spends most of its time inside the 1σ band, oscillating around VWAP. Pushes to the outer (2σ) band are stretched moves that, on a calm day, tend to revert back toward the mean — the same logic as fading the expected-move edge. The bands turn “price is high” into a measurable “price is two standard deviations above fair value.”

How to trade them

On a positive-gamma, range day, a rejection at the outer band is a reversion scalp back toward VWAP — fade the stretch. Enter on the rejection at the band, target VWAP (the mean), stop on acceptance beyond the band. It pairs naturally with dealer-hedging mean reversion: the bands measure the stretch, the regime tells you it'll revert.

The outer band isn't “price is high” — it's “price is stretched two sigma from fair value.” On a calm day, that stretch is a fade.

The trend-day warning

Bands mislead on trend days: in a strong trend, price can ride the outer band for hours, and fading each band tag is a slow bleed. The bands are a reversion tool for a reversion regime — in negative gamma, a tag of the band is often continuation, not exhaustion. As always, read the regime first: fade the bands when you should be fading, respect them when the tape is trending.