What Is VWAP (Volume Weighted Average Price)?
VWAP is the volume-weighted average price of an asset over a defined period — typically a single trading day, reset at the open. It's calculated as: (sum of price × volume) / (sum of volume) across all trades.
VWAP is the canonical benchmark used by institutional traders to measure execution quality. A buy executed below VWAP is considered "good" (better than average); a buy above VWAP is "bad." Many algorithmic execution strategies aim to fill orders close to VWAP throughout the day.
For retail traders, VWAP acts as dynamic support/resistance. Price reverting to VWAP after a sharp move is a common intraday pattern. Trading systems that combine VWAP with momentum filters (only buy when above VWAP and momentum is positive) tend to produce cleaner signals than either indicator alone.
Related terms
- Moving Average — A line plotted on a chart showing the average price over a chosen lookback period.
- Liquidity — The ease with which an asset can be bought or sold without significantly affecting its price.