What is VWAP?

Volume-weighted average price (VWAP) is a trading tool that all traders can use to ensure they get the best price. Short-term traders most frequently use the VWAP tool.

VWAP represents the average price at which a security has traded throughout the day, based on both volume and price.

 

Understanding VWAP

VWAP only considers one day at a time due to its intraday calculation.

VWAP calculates the average price using volume, providing a much more accurate snapshot of price action.

These indicators serve as a gauge to determine whether the execution of their orders was good or poor.

Where to view VWAP?

The VWAP is available in the watchlist, look for the VWAP column to see the value for the day.

Calculating VWAP

VWAP is important because it provides traders with insight into both the trend and value of a security.

VWAP is important because it provides traders with insight into both the trend and the value of the security.

The VWAP calculation is best visually seen in the charting software, which displays an overlay on the chart representing the calculations. This display appears as a line, similar to other moving averages.

 

General Strategies

When a security is trending, VWAP can provide valuable market insights.
If the price is:

  • above VWAP, it is a good intraday price to sell.
  • below VWAP, it is a good intraday price to buy.

On upward-trending days, traders can attempt to buy as prices bounce off VWAP. Alternatively, during a downtrend, they can sell as prices push up toward the VWAP line.

The Bottom Line

At the end of the day, if you are buying securities below the VWAP price, then you have done better than the average.

If the security was sold above the VWAP, it was a better-than-average sale price.

On trending days, attempting to capture pullbacks toward VWAP can lead to profitable results if the trend continues.

  • To find out where to view the VWAP in Watchlist and Order Pad, check out the videos.

    Included in this video of the watchlist in the Trade For Good mobile app.
    It covers:

    • add a code
    • tap start to add
    • finding a watchlist
    • edit a watchlist
    • delete from a watchlist

     

    Included in this video of the Order Pad in the Trade For Good web app.
    It covers:

    • open order pad
    • chose the buy or sell side
    • input buy order quantity
    • select order type
    • input price
    • select duration
    • choose order of execution type
    • order confirmation before placing
    • viewing open orders
    • modifying a buy order
    • canceling a buy order
    Read More

You can download the offline guide here Trading with Volume Weighted Average Price Guide

What you learn here has been used in our Trade for Good software.
Click on the button to find our software education videos.

Software Videos

You can read more of our educational articles in the Trade for Good Learn section
Trade for Good Learn

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