Volume-weighted average price
The average price for the period, weighted by volume at each price level, so high-volume trades count more. Traders compare price to VWAP to judge whether they're paying above or below the “fair” average for the session.
What the numbers mean
Standard VWAP has no lookback — it accumulates from the session open and resets each day, which is why it flattens out as the session progresses. The configurable parts are the anchor (session, week, month) and the optional standard-deviation bands drawn around it.
- Session-anchored — resets each day; no lookback to set
- 1, 2 and 3 deviation bands — optional envelopes marking stretch from VWAP
- Weekly or monthly anchoring — used by longer-term traders
- It flattens as the session progresses, because more volume is already averaged in
How it is used
Institutional desks use it as the execution benchmark — filling below VWAP is a good buy by that measure — and traders use it intraday as the line separating buyers' and sellers' control, with the deviation bands marking stretched conditions.
- Price above VWAP → buyers in control of the session; below → sellers
- First test of VWAP after an opening drive → a much-watched intraday entry
- Price at the second deviation band → stretched for the session
- Institutions use it as the execution benchmark, which is why price reacts around it
How it relates to everything else
VWAP is the intraday counterpart to a moving average, with two differences that matter: it is weighted by volume, and it resets daily. That reset is what makes it the reference for day traders and useless for swing traders, who use anchored VWAP instead. Where VWAP, a pivot level and a volume-profile POC line up, the confluence is treated as the strongest kind of intraday level.
- VWAP + pivot + POC agreeing → the strongest intraday confluence
- Becomes less responsive into the afternoon as volume accumulates
- Meaningless in the first minutes of a session, when almost no volume has been averaged
- Anchored VWAP removes the daily reset
What to watch for
It is weighted by the whole session, so it becomes progressively less responsive into the afternoon, and it resets to meaninglessness in the first minutes of the next day.