Short Answer
VWAP (Volume Weighted Average Price) is the average price paid for an asset over a period, weighted by volume. On many platforms it resets each session (especially for intraday use). Price above VWAP often reads as relative strength for that session; below as relative weakness. Institutions use it as an execution benchmark.
Formula (conceptual): VWAP = Σ(Price × Volume) / Σ(Volume) over the relevant window.
Detailed Explanation
VWAP answers: “What was the fair average fill given how much traded at each price?” It combines price and volume, unlike a simple moving average of close.
Interpretation
- Price above VWAP → session buyers more aggressive on average (simplified narrative).
- Price below VWAP → sellers more aggressive on average.
- VWAP acts as dynamic support/resistance intraday—mean reversion and trend-with-VWAP setups both exist.
- Multiple tests of VWAP highlight its role as a magnet.
Common Uses
- Day trading: Bias, pullback entries, mean reversion vs trend.
- Execution quality: Compare your fills to VWAP.
- Confluence: Combine with structure, levels, and other indicators.
Settings
Common implementations use typical price (e.g. (H+L+C)/3) or close per bar; session reset behavior depends on the chart/data feed.
Common Mistakes
- Using session VWAP as if it were a weekly trend tool (wrong horizon).
- Ignoring volume context (low volume → VWAP less meaningful).
- Fighting a strong one-way VWAP slope without a plan.
- Relying on VWAP alone without price action or risk rules.
VWAP in VaultCharts
VaultCharts supports VWAP where configured in the indicator suite. Use it with your timeframe and data (crypto, stocks, etc.) per your workflow.