Alphawick
volumeintermediate

Volume Weighted Average Price

VWAP

VWAP calculates the average price of a security based on both volume and price. It's widely used by institutional traders to gauge whether they're buying/selling at a good price relative to the day's trading. VWAP resets at the start of each trading day.

Interactive Chart

110.30

Quick Answer

Average price weighted by volume, popular with institutions. VWAP is the ratio of value traded to total volume traded over a time period. It's a trading benchmark that gives the average price a security has traded at throughout the day, based on both volume and price.

Trading Signals

Price Above VWAP

Bullish

Buyers in control, bullish intraday bias

Price > VWAP

Price Below VWAP

Bearish

Sellers in control, bearish intraday bias

Price < VWAP

VWAP Cross Up

Bullish

Price crosses above VWAP

Price crosses above VWAP

VWAP Cross Down

Bearish

Price crosses below VWAP

Price crosses below VWAP

What is VWAP?

VWAP is the ratio of value traded to total volume traded over a time period. It's a trading benchmark that gives the average price a security has traded at throughout the day, based on both volume and price. Institutional traders use it to ensure they get fair execution prices.

How to Read VWAP

Price above VWAP suggests bullish sentiment; price below suggests bearish. VWAP acts as dynamic support/resistance throughout the day. The further price moves from VWAP, the more stretched it is and more likely to revert. VWAP is most relevant for intraday trading.

Trading Signals

Key signals: Price crossing VWAP (trend change), price bouncing off VWAP (support/resistance), price extended far from VWAP (mean reversion opportunity), and VWAP slope indicating intraday trend.

Trading Strategies

Mean reversion: Fade extended moves away from VWAP. Trend following: Stay long above VWAP, short below. VWAP bounce: Enter long on pullback to VWAP in uptrend. Execution: Use VWAP as benchmark for entry/exit quality.

Formula

Formula
VWAP = Σ(Price × Volume) / Σ(Volume)
Typical Price = (High + Low + Close) / 3

Tips & Common Mistakes

Pro Tips

  • •VWAP resets daily - most useful for intraday trading
  • •Add standard deviation bands around VWAP for targets
  • •Price rarely stays far from VWAP for long
  • •Institutional order flow tends to gravitate toward VWAP

Common Mistakes

  • •Using VWAP for swing trading (it resets daily)
  • •Ignoring that VWAP flattens late in day
  • •Not considering overall market trend
  • •Trading against strong momentum just because of VWAP

Best Used With

Support/ResistancePrice ActionStandard Deviation Bands
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