What is VWAP in trading?
In one line: VWAP, the volume-weighted average price, is the average price of the day where prices with more trading count more. It resets each session.
A simple example
Say only 2 trades happen in a stock today:
- 100 shares at $10.00
- 300 shares at $11.00
A plain average of the two prices is $10.50. But most of the shares traded at $11. VWAP weighs each price by its Volume:
(100 × $10 + 300 × $11) ÷ (100 + 300) = ($1,000 + $3,300) ÷ 400 = $10.75
That's the VWAP. It sits closer to $11, because that's where most of the trading happened.
On a real chart, the platform does this for every candle and draws it as a line.
How it's different from a moving average
A Moving average looks back over a set number of candles and treats each close the same. VWAP starts fresh at the open each session and keeps adding the day's trades. By late afternoon, the line moves slowly, because a whole day of trading is behind it.
Why it matters
VWAP shows the "fair" average price of the day so far. Price above VWAP means buyers have been paying more than the day's average. Below it means the reverse.
That's why it's popular in Day trading. Many traders watch how price reacts when it comes back to the line. The full guide is VWAP explained.
A common mistake
Using VWAP on a weekly or daily chart. The standard VWAP resets every session. It's built for intraday charts, like 1-minute to 15-minute candles. On a daily chart it doesn't mean the same thing.
The other slip: treating the line as a wall. Price can cross VWAP many times in a choppy day.
Questions
Does VWAP reset every day?
Yes, the standard VWAP resets at the start of each session. Some platforms also offer "anchored" VWAP, which starts from a point you pick.
Does VWAP work for forex?
Forex has no central exchange, so there's no single true volume figure. Platforms use their own tick data, so VWAP on forex is rougher than on stocks or futures.
Is VWAP a good indicator for beginners?
It's simple to read: above or below the day's average. Like any line, it describes the day so far. It doesn't predict the next move.
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