Technical indicators
Volume-weighted average price (VWAP)
Definition
VWAP is the average price a stock has traded at during the session, weighted by the volume at each price, and it resets every day. Day traders read price above VWAP as buyers in control and below it as sellers in control. The VWAP trading strategy guide covers the main setups.
Example
Say 10,000 shares of a stock trade at $20.00 and then 30,000 shares at $21.00 in the first half hour. VWAP is ($200,000 + $630,000) ÷ 40,000 = $20.75, not the simple midpoint of $20.50, because most shares changed hands at $21.00. If the price then slips to $20.60, it trades below VWAP, and the next morning the calculation starts over from the first trade.
Hypothetical numbers, for illustration only.
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