The benchmark price that institutions use to evaluate trade quality.
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Overview
VWAP (Volume Weighted Average Price) is the average price of an asset weighted by volume, calculated from the open of the trading session. It represents the "true average price" paid by all market participants during the day and is the primary benchmark used by institutional traders to evaluate whether they executed their orders at a good price.
VWAP = Cumulative (Price Γ Volume) Γ· Cumulative Volume
Because VWAP resets at the start of each session, it is primarily an intraday tool. Price above VWAP is considered bullish (buyers are in control); price below VWAP is considered bearish. Institutional algorithms often target VWAP when executing large orders to avoid moving the market, which means VWAP acts as a strong magnet for intraday price.
Anchored VWAP (AVWAP) extends the concept by allowing traders to anchor the calculation to any significant event: an earnings announcement, a swing high, the start of an uptrend. This makes AVWAP useful beyond the intraday context for swing and position traders.
Common VWAP strategies include: buying pull-backs to VWAP in uptrending sessions, using VWAP as a dynamic intraday support/resistance, and trading VWAP band expansions (similar to Bollinger Bands but volume-weighted).
Strategy Code
This is a TradingView Pine Script example for this indicator. Paste it into the TradingView Pine Editor, add it to your chart, and adjust inputs for your market and timeframe.
//@version=6
strategy("VWAP β Volume Weighted Average Price", overlay=true)
v = ta.vwap(close)
emaLen = input.int(20, "Trend EMA")
trend = ta.ema(close, emaLen)This is a thinkorswim ThinkScript example for this indicator. Open thinkorswim, create a custom study, paste the script, and apply it to your chart.
def vwapVal = VWAP();
def trend = ExpAverage(close, 20);
def buySignal = close crosses above vwapVal and close > trend;
def sellSignal = close crosses below vwapVal;
AddOrder(OrderType.BUY_AUTO, buySignal, close, 1, Color.GREEN, Color.GREEN, "VWAP Buy");Join thousands of traders who use auto-Trading to execute this strategy automatically, 24/7.
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