Volume / benchmark

VWAPVolume Weighted Average Price

VWAP (Volume Weighted Average Price) is the average price weighted by traded volume. It is the institutional benchmark for execution quality and one of the most-watched intraday reference levels.

Single trading day (intraday)

Default period

Tracks price

Range

Above / below VWAP bias

Signal levels

Institutional benchmark + intraday bias

Best use

What is VWAP?

VWAP plots the average traded price for the day, weighted by volume. Where a Simple Moving Average treats every bar equally, VWAP gives more weight to bars with higher traded volume. The result is the 'true' average price most institutions reference.

Algorithmic execution desks measure their performance against VWAP — if a trader's average fill price is below VWAP on a long, they 'beat the benchmark.' This makes VWAP a self-fulfilling level: price often retraces to VWAP because institutions push it there.

Category: Volume / benchmark
Default settings: Single trading day (intraday)
Signal range: Tracks price
Introduced by: Institutional desks, 1980s

How VWAP works

Calculation per bar:

Typical Price = (High + Low + Close) / 3 VWAP = Cumulative (Typical Price * Volume) / Cumulative Volume

VWAP resets at the start of each trading day in most platform implementations. The cumulative nature means it gets 'stickier' as the day progresses — early-session movements have less weight on later-session VWAP.

Some platforms offer 'anchored VWAP' — a VWAP that starts from a specific date or event rather than the start of the day. Useful for tracking institutional flow from a major news event onward.

How to use VWAP

Two essential uses.

1. Intraday bias: Price above VWAP = bullish bias for the day. Price below = bearish. Many institutional traders only take longs above VWAP and shorts below. The rule is remarkably effective for intraday work.

2. VWAP retests in trends: In a strong intraday uptrend, price often pulls back to VWAP before continuing higher. These pullbacks are high-probability entry points. Same logic inverted for downtrends.

VWAP is primarily an intraday tool. Outside of session hours or on multi-day swing trades, anchored VWAP (manually placed at a key event) is more useful than the default daily-reset VWAP.

Want more practical context? Look up unfamiliar terms in the forex glossary, or see how indicators stack on real charts in the trading blog.

VWAP FAQ

What is VWAP used for?

Two primary uses: as an institutional benchmark (algorithmic execution measures performance against VWAP), and as an intraday bias filter (price above VWAP = bullish bias for the day).

When does VWAP reset?

In most platforms, VWAP resets at the start of each trading day. Some platforms offer "anchored VWAP" which can be manually placed at a specific date or event and runs forward from there.

Is VWAP better than a moving average for intraday?

Yes, generally. Moving averages treat every bar equally; VWAP weights by volume. Since volume reflects actual institutional commitment, VWAP is closer to the "true" average price most large traders reference.

Does VWAP work on forex?

Forex lacks centralized volume data (it is OTC), but tick volume (a proxy) makes VWAP useful on liquid pairs. The institutional crowd uses futures-based VWAP for FX context: EUR-FX futures volume to compute a "synthetic" EUR/USD VWAP.

What is "anchored VWAP"?

A VWAP manually anchored at a specific event (e.g. an earnings release, a major news event, a key low). It runs forward from there and is useful for tracking institutional flow relative to a known catalyst.

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