Indicators
VWAP (Volume-Weighted Average Price)
3 min
VWAP is the Volume-Weighted Average Price — the average price over a session, with each price weighted by the volume traded there. It answers: "what is the true average price most participants paid today?"
How it differs from a moving average
A moving average treats every period equally. VWAP weights by volume, so the prices where the most shares changed hands pull the line hardest. It is calculated cumulatively through a session and resets at the start of each new session.
How to read it
- Price above VWAP — buyers are in control for the session; many treat it as bullish.
- Price below VWAP — sellers are in control.
- VWAP often acts as intraday support or resistance as price reverts toward it.
Who uses it and the limitation
VWAP is heavily used by institutions as an execution benchmark — they want to buy below it and sell above it to prove good execution. That is why it can be self-fulfilling intraday.
Its main limitation: VWAP is an intraday tool. Because it resets each session, it is far less meaningful on daily or weekly charts, and it lags as the session matures (the cumulative average gets harder to move late in the day). It is a day-trading instrument, not a swing-trading one.
This content is for educational and informational purposes only and is not investment, financial, tax or legal advice. Trading and investing carry risk, including the possible loss of capital. Any performance shown by third-party tools is hypothetical and not a promise of future results. Do your own research and consider professional advice before making any decision.