Volume Weighted Average Price (VWAP)

Overview

The Volume Weighted Average Price (VWAP) 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. It is important because it provides traders with insight into both the trend and value of a security. The volume weighted average price (VWAP) appears as a single line on intraday charts (1 minute, 15 minute, and so on), similar to how a moving average looks. Retail and professional traders may use the VWAP as part of their trading rules for determining intraday trends.

KEY TAKEAWAYS

• The volume weighted average price (VWAP) appears as a single line on intraday charts (1 minute, 15 minute, and so on), similar to how a moving average looks.
• Retail and professional traders may use the VWAP as part of their trading rules for determining intraday trends.

Description

VWAP is calculated by adding up the dollars traded for every transaction (price multiplied by the number of shares traded) and then dividing by the total shares traded.

The Formula for the VWAP Is:

VWAP = SUM(Volume * Price) / SUM(Volume)

It can be seen from the formula that VWAP is the summed sum of the products of volumes by the price for the considered time period, divided by the total amount of volume for the considered time period. The time period can take the following values - Session, Week, Month, Year and Price - Close, Open, High, Low, HL / 2, HLC / 3, HLCC / 4

The time period and price are set in the indicator settings.

To find out more about this indicator and it`s trading signals click here.

Settings in the chart