VWAP (Volume Weighted Average Price)
VWAP (Volume Weighted Average Price)
What is VWAP?
Volume Weighted Average Price (VWAP) is a trading benchmark that calculates the average price an asset has traded at throughout the session, weighted by volume. It is the gold standard for institutional traders to evaluate execution quality and is widely used as intraday support/resistance.
How it works
VWAP is calculated cumulatively from the start of each trading session:
Typical Price = (High + Low + Close) / 3
VWAP = Cumulative(Typical Price x Volume) / Cumulative(Volume)
VWAP resets at the beginning of each session (e.g., daily for stocks, or continuously for 24/7 crypto markets depending on the implementation).
Key features
- Institutional benchmark — used by large traders to measure whether they bought/sold at a good price
- Cumulative calculation — builds throughout the session, becoming smoother over time
- No user parameters — VWAP is calculated automatically from OHLCV data
- Intraday indicator — most meaningful on intraday timeframes (1m to 4h)
- Dynamic support/resistance — acts as a magnet for price
Trading signals
Price vs. VWAP
- Price above VWAP — buyers are dominant, bullish intraday bias
- Price below VWAP — sellers are dominant, bearish intraday bias
- Price returns to VWAP — mean reversion opportunity (VWAP acts as a magnet)
VWAP bounce
- Price touches VWAP and bounces in the trend direction — trend continuation signal
- Works best during trending days
VWAP cross
- Price crosses above VWAP — intraday momentum shift to bullish
- Price crosses below VWAP — intraday momentum shift to bearish
Parameters
VWAP has no user-configurable parameters. It is calculated from session OHLCV data automatically.
Example conditions
| Condition | Meaning |
|-----------|---------|
| close > VWAP | Price is above VWAP — bullish intraday bias |
| close < VWAP | Price is below VWAP — bearish intraday bias |
| close cross_over VWAP | Price crossed above VWAP — momentum shift |
| close cross_under VWAP | Price crossed below VWAP — momentum shift |
Tips
- VWAP is most useful on intraday timeframes (1m-4h); less meaningful on daily/weekly
- Institutional traders often try to buy below VWAP and sell above VWAP
- On trending days, price stays on one side of VWAP; on ranging days, it crosses frequently
- Combine VWAP with RSI or Stochastic for better entry timing
- VWAP flattens out toward end of session — early session signals are more reliable
- For crypto (24/7 markets), VWAP typically uses UTC daily reset