VWAP (Volume Weighted Average Price)

The VWAP (Volume Weighted Average Price) was born on institutional trading desks: it is the benchmark used to evaluate the execution quality of large orders. Unlike a classic moving average, which treats every candle the same way, the VWAP gives more weight to prices where large volumes changed hands. It therefore represents the average price actually paid by all participants.

For the retail trader, it is a value reference: above the VWAP, the period's average buyer is in profit; below it, they are at a loss. This asymmetry shapes market behavior around the line.

How it's calculated

For each candle, a typical price is computed (the average of the high, low and close), then multiplied by the candle's volume. The VWAP is the cumulative sum of these amounts divided by the cumulative sum of volumes. In other words: total money exchanged divided by total units exchanged : the market's average execution price. The VWAP has no period parameter to tune: it accumulates from the start of its reference period, classically the current session.

This cumulative construction sets it apart from moving averages: early in the period it reacts sharply, then gains inertia as volume accumulates.

How to read it

• Price above the VWAP: the period's buyers are on average in profit : bullish intraday bias.
• Price below the VWAP: bearish bias : bounces back to the VWAP often act as selling zones.
• Dynamic support/resistance: price frequently comes back to test the VWAP, where institutional players benchmark their executions.
• Distance from the VWAP: a price stretched far from its VWAP is statistically extended and often reverts toward it.

Its limitation follows from its nature: the VWAP is above all an intraday tool. On long timeframes, its cumulative build-up makes it very inert, and its relevance depends on the quality of available volume data : excellent for crypto and stocks, more indirect for forex, where volumes reflect platforms rather than the global market.

In the screener

Rule examples you can build in Screener.Trading: "close above the VWAP on M15" to keep only assets with a bullish intraday bias; "close below the VWAP on H1 for several candles" to identify names under persistent selling pressure. The VWAP can be compared to price, a value or other indicators, like any line.

Across timeframes, a common combination is to filter the underlying trend on the daily (close above the 200 SMA) and then look intraday for assets reclaiming their VWAP to the upside : a sign that session flow is turning back to buying within a supportive context.