VWAP Volume Weighted Average Price

VWAP stands for Volume-Weighted Average Price. It’s a technical indicator that shows the average price of a security throughout the trading day, weighted by trading volume. Unlike a simple moving average, VWAP gives more importance to prices with higher volume, making it a more accurate reflection of market activity.

⚙️ How VWAP Works

VWAP is calculated using this formula:

VWAP = \frac{\sum (Price \times Volume)}{\sum Volume}

• It resets at the start of each trading session.
• Appears as a single line on intraday charts.
• Updates in real time as new price and volume data come in.

📈 Common Uses of VWAP

Traders use VWAP in several strategic ways:

• Trend Confirmation:
• Price above VWAP → bullish sentiment
• Price below VWAP → bearish sentiment
• Entry & Exit Points:
• Buy when price crosses above VWAP
• Sell or short when price drops below VWAP
• Support & Resistance:
• VWAP often acts as a dynamic support or resistance level during the day.
• Institutional Benchmarking:
• Large institutions use VWAP to execute trades without significantly impacting market prices.
• Algorithmic Trading:

• VWAP is often used in automated strategies to optimize order execution.