VWAP

How VWAP is calculated

Through the session, VWAP runs a cumulative total of price times volume divided by cumulative volume. Because it resets each day and weights by volume, it shows the true average price most participants paid, not just the midpoint.

How VWAP is used

• →Use VWAP as an intraday trend filter: above it favors longs, below it favors shorts.
• →Many desks treat VWAP as a fair-value line and look for pullbacks to it.
• →Watch how price reacts on the first test of VWAP after a trend move.
• →It is most useful intraday and resets each session, so it is less relevant for swing trades.

Common mistakes

• ✕Using VWAP on higher timeframes or over multiple days, where it loses its meaning.
• ✕Treating a VWAP cross as a signal without any other confirmation.

Watch: VWAP explained