VWAP (Volume Weighted Average Price)

Formula

VWAP = Σ(Typical Price × Volume) ÷ Σ(Volume), where Typical Price for each interval is usually (High + Low + Close) ÷ 3 and the sums run cumulatively from the session open.

How it is read

Traders commonly read VWAP as an intraday reference for "where the average participant is positioned." Price trading above the VWAP line for much of the session is generally described as buyers having paid above the day's volume-weighted average, while price below VWAP is described the opposite way; the line is therefore often used as a neutral benchmark to gauge intraday strength or weakness and to frame whether the current quote sits at a premium or discount to the day's average. Institutions and execution desks also use VWAP as an execution benchmark, comparing the average fill price of an order against the day's VWAP to judge execution quality.

What it does not tell you

VWAP is a backward-looking, cumulative average of what has already traded; it does not forecast where price will go, nor does it mark a level price "must" return to or respect. Because it resets each session and weights by volume, early-session values are noisy (few data points) and the line grows progressively less responsive to new trades as the day's cumulative volume builds. It also varies by data source and interval (tick vs. 1-minute vs. 5-minute, and whether pre-open or auction prints are included), so two charts can show slightly different VWAP lines for the same instrument. A standard intraday VWAP carries no information across days, and on thinly traded contracts a few large prints can skew it.