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VWAP

In short

Volume-Weighted Average Price — the average price weighted by trading volume

VWAP is the true average price traders paid throughout the day, weighted by how many shares traded at each price. Institutions use it as a benchmark — buying below VWAP is considered a good fill.

VWAP = cumulative (price × volume) ÷ cumulative volume. It resets each trading day. Institutional traders benchmark order execution against VWAP. Price above VWAP = bullish intraday; below = bearish. Commonly used in algorithmic trading.

Formula

VWAP = Σ(Price × Volume) ÷ Σ(Volume)

Related concepts

  • OBV (On-Balance Volume) — OBV adds volume on up days and subtracts on down days. The idea: if prices are rising but volume is weak, the move isn't convincing. When OBV rises before price, big money may be accumulating.
  • Volume Profile — Volume profile shows where most trading happened at different price levels. Heavy trading at a price means traders consider it fair value. Low trading zones are areas where price moves fast.
  • Market Order — A market order says 'buy this stock right now at whatever price it's selling for.' You get filled immediately but might pay slightly more than you expected, especially for less liquid stocks.
  • Slippage — You see a stock at $50 and hit buy. By the time your order fills, it's $50.08. That $0.08 is slippage — the price moved between when you decided to buy and when the order actually filled.