VWAP

What is VWAP?

VWAP (Volume Weighted Average Price) is the average price a stock has traded at throughout the day, weighted by volume. It gives more weight to prices where more shares changed hands.

Why traders use it

• Institutional benchmark: large funds measure execution quality against VWAP
• Intraday support/resistance: price tends to gravitate toward VWAP
• Trend filter: trading above VWAP suggests bullish sentiment, below suggests bearish

How to trade with VWAP

Day traders often look for long entries above VWAP and short entries below VWAP. A stock reclaiming VWAP after trading below it can signal a reversal. VWAP resets at the start of each trading day, making it purely an intraday indicator.

VWAP is most useful in the first 2-3 hours of trading when volume is heaviest and the level is most respected.