Volume Weighted Average Price (VWAP)
CuriousFolk
CuriousFolk
VWAP (Volume Weighted Average Price) is a trading benchmark used by traders that gives the average price a security has traded at throughout the day, based on both volume and price.
Why It Matters
- Institutional Use: Large funds use VWAP to execute orders without moving the market too much.
- Trend Confirmation: Price above VWAP is bullish; price below VWAP is bearish.
Intraday Performance
VWAP acts as a dynamic support/resistance level during the trading day.
| Time of Day | Price vs VWAP | Strategy | Win Rate |
|---|---|---|---|
| Morning | Price > VWAP | Buy on retest | 65% |
| Mid-day | Price < VWAP | Short on retest | 60% |
| Closing | Price stabilizes | Mean reversion | 55% |
For day traders, VWAP is often considered the most important indicator on the chart.