What is VWAP?

VWAP (Volume-Weighted Average Price) is a trading indicator that calculates the average price of an asset weighted by volume. It provides a more accurate view of the asset's true price by accounting for the size of trades, not just their frequency.

Calculation

Formula Components

• Trading volume
• Price per trade
• Time period
• Cumulative values
• Reset period

Implementation

• Multiply price by volume
• Sum the results
• Divide by total volume
• Calculate continuously
• Daily reset typical

Trading Applications

Usage Scenarios

• Institutional benchmarking
• Fair price determination
• Trade execution timing
• Trend identification
• Support/resistance levels

Strategy Integration

• Entry/exit signals
• Price comparison
• Market efficiency
• Cost analysis
• Algorithm trading

Related Terms

• Volume Analysis
• Technical Analysis
• Volume Profile
• Market Price