volume Indicator
What Is Volume Weighted Average Price (VWAP)?
VWAP calculates the average price weighted by volume, showing the true average price traders paid.
Quick Answer
VWAP calculates the average price weighted by volume, showing the true average price traders paid.
What Does VWAP Measure?
Volume Weighted Average Price (VWAP) is calculated by adding up the dollar amount traded for every transaction and dividing by total shares traded. It provides a benchmark for the average price at which a security has traded throughout the day, weighted by volume. Institutional traders often use VWAP to assess execution quality.
Formula:
VWAP = Σ(Price × Volume) / Σ(Volume)How to Read VWAP
- 1Price above VWAP suggests bullish intraday sentiment
- 2Price below VWAP suggests bearish intraday sentiment
- 3VWAP acts as dynamic support/resistance
- 4Multiple touches of VWAP indicate mean reversion
How to Use VWAP in Trading
✓Benchmark execution quality
✓Find intraday support and resistance
✓Identify fair value for day trading
✓Confirm trend direction with volume
VWAP Settings
| Setting | Default | Description |
|---|---|---|
| Source | hlc3 | Price source (typical price = HLC/3) |
Common Mistakes to Avoid
✕Using VWAP for swing trading (resets daily)
✕Ignoring volume context
✕Taking trades against strong VWAP trends
✕Not combining with other confluence
Use VWAP in VaultCharts
VaultCharts includes Volume Weighted Average Price with customizable settings. Combine it with our automated pattern detection and trade signals for better analysis.