What Is VWAP?
VWAP (Volume-Weighted Average Price) is the average price of an asset weighted by volume throughout a trading session. Unlike a simple moving average that weights all prices equally, VWAP gives more weight to prices where more volume was traded — reflecting the "true" average price participants actually paid.
How VWAP Works
VWAP is calculated as the cumulative (Price × Volume) divided by cumulative Volume for the session. It resets daily (or can be "anchored" to any starting point). Price above VWAP indicates buyers are in control; below indicates sellers dominate. VWAP acts as dynamic support/resistance — institutional traders often target VWAP for entries to ensure they're buying below the market's average price.
Why It Matters for Traders
VWAP is the institutional benchmark. Large funds and algorithmic traders use VWAP to assess execution quality — buying below VWAP means you got a better price than the market average. For retail traders, VWAP provides a reliable intraday support/resistance level. Anchored VWAP from significant events (cycle lows, halving dates) creates powerful longer-term reference levels.
