Volume Weighted Average Price (VWAP)
VWAP is a crucial technical indicator for intraday trading, resetting at the start of each trading day. It represents the average price a security has traded at throughout the day, based on both volume and price.
Dynamic Chart Demo
* This chart uses synthetic data to demonstrate the indicator's behavior in typical market conditions.
Core Usage
Advantages
- Incorporates volume data, not just price
- Volume-weighted benchmark for the session average traded price
- Widely used as an execution benchmark by desks and algos
Limitations
- Only useful for intraday trading (resets daily)
- Becomes less sensitive as the trading day progresses
- Ineffective on assets without reliable volume data
Calculation Logic
Understanding the mathematical logic behind indicators helps you interpret signals more accurately and avoid misuse in unsuitable market environments.
Common Trading Strategies
VWAP Mean Reversion
Sell when price is significantly above VWAP, Buy when significantly below.
VWAP Breakout
Buy when price breaks above VWAP with high relative volume.
Best For
"Day traders and institutional execution analysis."
Note: Technical indicators are mathematical calculations based on historical price and volume. They should be used as part of a comprehensive trading system, not as a standalone entry signal.