VWAP
The average price weighted by volume traded throughout the session — the institutional benchmark for execution quality.
Formula
VWAP = Σ(Price × Volume) / Σ(Volume) — cumulative from session open.
VWAP is the cumulative ratio of price×volume to total volume since the session open. It resets each day and represents the true average price at which all shares have exchanged hands weighted by activity.
Institutions use VWAP as a benchmark: buying below it is considered "good fills"; selling above it is favourable. Price above VWAP signals intraday bullish control; below signals bearish control. The first test of VWAP after a morning impulse is one of the cleanest day-trade setups.
Example
AMZN opens at $185 and rips to $189 in the first 30 minutes. VWAP sits at $186.50. A momentum trader who missed the open waits for the first pullback to VWAP at $186.50, buys when price reclaims it on a 5-minute candle close, and targets a retest of the morning high.
Related Terms
Confluence
The overlap of two or more independent technical signals at the same price level, strengthening the case for a trade.
IntermediateMean Reversion
The tendency of price to return toward its historical average after an extreme deviation — the foundation of counter-trend trading.
IntermediateMoving Average
The average closing price over N periods, updated each bar — smooths noise and exposes the underlying trend direction.
BeginnerPivot Point
A calculated average of the prior period's high, low, and close used as a benchmark level for the current session.
IntermediateSupport
A price level where buying pressure has historically halted or reversed a downward move.
BeginnerVolume Profile
A histogram of traded volume at each price level over a period, revealing where the market has done the most and least business.
AdvancedVWAP Order
An execution algorithm that slices a large order across the session to track the volume-weighted average price, minimizing footprint.
Advanced