How VWAP is calculated
VWAP = Σ (price × volume) ÷ Σ volume, added up from the start of the trading day. A price at which many shares traded pulls VWAP towards it more than a price with only a few shares traded. VWAP starts fresh every morning at 9:15 AM.
Why traders watch it
- Price above VWAP — the stock is trading above the average price paid today; buyers since the open are, on average, in profit.
- Price below VWAP — the stock is below today's average price.
- Large funds often measure their own buying or selling against VWAP, which is why it is a widely followed intraday reference.
VWAP vs moving averages
A moving average uses closing prices over several days and treats every bar equally. VWAP covers only today and gives more weight to busy periods. It is an intraday tool — it is not used on daily or weekly charts in the same way.
VWAP describes where trading has happened, not where the price will go next.