The volume-weighted average price (VWAP) is the average price a stock traded at over a period, weighted by how much volume traded at each price — not a simple average of the high and low. It shows where the real money actually traded, not just where the price has been.
VWAP = Σ(price × volume) ÷ Σ(volume), accumulated from the session open. Example (illustrative): in the first three trades of the day a stock trades 200 shares at $100, 300 shares at $102, and 500 shares at $101. The volume-weighted sum is (200 × 100) + (300 × 102) + (500 × 101) = 20,000 + 30,600 + 50,500 = 101,100, divided by the total volume of 1,000 shares, giving a VWAP of $101.10 — pulled toward $101 because that price carried the most volume, not sitting at the simple average of $101.00. The figures here are illustrative inputs chosen to show the arithmetic, not a live reading for any real stock.
This is the detail that trips up first-timers: a moving average keeps rolling over a fixed lookback window (the last 50 days, the last 20 minutes) with no reset point. Classic VWAP does the opposite — it accumulates from each session's open and resets to zero at the next open. A stock's VWAP on Tuesday has nothing to do with its VWAP on Monday; they are two separate calculations. If a chart shows VWAP continuing smoothly across days without a jump at the open, it isn't the classic intraday VWAP.
VWAP is the standard benchmark large institutions judge their own execution against: a fund that buys a large position below VWAP got a better-than-average fill; buying above VWAP means paying more than the day's typical participant. Because so many market participants watch and trade around it, VWAP also tends to act as short-term intraday support or resistance — price often pauses or reverses near it during the session. None of that makes it predictive on its own; it is a widely-used public benchmark, not a proprietary signal.
VWAP says nothing about why a stock traded where it did — a low-liquidity stock can show a VWAP dragged around by a handful of large trades, and a VWAP calculated over a thinly-traded session is far less meaningful than one from a heavily-traded blue-chip. It also carries no view of tomorrow: VWAP describes where a stock already traded today, not where it is headed next. Treat it as an execution-quality and intraday-levels tool, never a standalone buy or sell signal.
A moving average rolls over a fixed lookback window with no reset point. Classic VWAP accumulates from each session's open and resets to zero at the next open, so it describes 'today so far,' not a rolling multi-day trend.
It's the standard benchmark for judging execution quality: buying below VWAP means a better-than-average fill for the day, buying above it means paying more than the typical participant. Large orders are often algorithmically worked to track it.
No. VWAP describes where a stock already traded, weighted by volume — it has no forward-looking component. It can act as short-term intraday support or resistance because many participants watch it, but it is not a standalone buy or sell signal.
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Educational research only — not investment advice.