Volume Weighted Average Price (VWAP)

Volume Weighted Average Price (VWAP) is the average price traded during a selected period, weighted by volume. In its standard form, it is used as an intraday benchmark that starts at the session open and updates throughout the day, showing where the bulk of trading has occurred on a volume-adjusted basis.

VWAP combines price and volume into one running average. Unlike a simple moving average, it gives more influence to prices where more volume is traded. That makes it useful as a “where business was done” reference during the session. Traders often read price above VWAP as stronger intraday positioning and price below VWAP as weaker positioning, but VWAP itself is still a reference tool, not a standalone signal.

• Choose the trading period being tracked, most commonly the current session.
• For each bar, determine a representative price for that bar and pair it with that bar’s volume.
• Keep a running cumulative total of price multiplied by volume, and a separate running cumulative total of volume.
• Divide the cumulative price-volume total by cumulative volume to get the current VWAP reading.

Note: In standard session-based use, VWAP resets when the next session begins.

VWAP is commonly used in three connected ways:

• Benchmark / fair-value reference: traders compare current price to VWAP to judge whether price is trading above or below the session’s volume-adjusted average.
• Trend filter: sustained trade above VWAP can support a bullish intraday read, while sustained trade below VWAP can support a bearish intraday read.
• Execution / reaction level: traders and institutions use VWAP to judge execution quality and to watch for reactions, reclaim attempts, or failures around the line during the day.

• Session VWAP: the standard version that resets each trading session.
• Anchored VWAP options: some platforms allow VWAP to reset from a chosen anchor such as a session, week, month, or specific event point.
• VWAP bands: many charting tools add standard-deviation-style bands around VWAP to frame extension away from the average.
• Hide-on-higher-timeframes settings: some platforms suppress session VWAP on daily-or-higher charts because its main use is intraday.

• Treating VWAP as the same thing as POC or Value Area. VWAP is a running volume-weighted average; it is not a profile-derived level.
• Using session VWAP as a multi-day level without checking the anchor. Standard VWAP typically resets each session, while anchored variants follow different rules.
• Assuming price above VWAP automatically means “buy” or price below VWAP automatically means “sell.” It still needs context, structure, and confirmation.
• Ignoring low-volume conditions. VWAP is generally most useful when intraday volume is meaningful enough for the average to reflect real participation.
• Confusing VWAP with a moving average. VWAP is volume-weighted and period-anchored; a moving average is not.