An average price of an asset weighted by trading volume.
VWAP (Volume-Weighted Average Price) is an indicator that calculates the average price of an asset throughout a trading period, weighted by trading volume. VWAP helps traders understand the true average execution price across varying liquidity levels.
It is widely used by institutions, algorithms, and market makers.
How VWAP Is Calculated
VWAP = (Sum of Price × Volume) ÷ (Total Volume) over a specific timeframe.
This creates a volume-sensitive average rather than a simple price average.
Why VWAP Matters
Identifies fair value for large trades
Helps avoid moving the market during execution
Used as a benchmark for institutional trading performance
Indicates trend direction and market strength
Helps detect premium/discount zones compared to real demand
VWAP in Trading Strategies
As a trend filter: Price above VWAP = bullish bias
As dynamic support/resistance
For execution algorithms to minimize slippage
For intraday trading to track real-time value
Summary
VWAP is a volume-weighted average price used to measure the fair value of an asset throughout a trading period, helping traders understand price behavior relative to volume.
