Definition
VWAP represents the average price a stock traded at during the day, weighted by volume. Institutional traders use it as a benchmark - buying below VWAP or selling above it is considered favorable execution. VWAP resets at each trading session.
Formula
VWAP = Σ(Price × Volume) / Σ(Volume)
Example
If 1000 shares traded at $50 and 2000 at $51, VWAP = (1000×$50 + 2000×$51) / 3000 = $50.67. Trading below $50.67 means buying at a good price relative to the day's average.
FAQ
What is VWAP (Volume-Weighted Average Price)?
The average price weighted by trading volume throughout the day.
How do you calculate VWAP (Volume-Weighted Average Price)?
A common formula for VWAP (Volume-Weighted Average Price) is: VWAP = Σ(Price × Volume) / Σ(Volume)
Why is VWAP (Volume-Weighted Average Price) important?
VWAP (Volume-Weighted Average Price) helps investors evaluate technical analysis and make more informed decisions.