VWAP (Volume Weighted Average Price)

📘 VWAP (Volume Weighted Average Price) — Complete Guide

🔹 What is VWAP?

VWAP stands for Volume Weighted Average Price. It gives the average price a stock has traded at during the day, based on both price and volume.

Formula:
VWAP = (Cumulative Price × Volume) / Cumulative Volume

🔹 Why is VWAP Important?

• Shows true average price of the day.
• Used as a benchmark by institutions.
• Identifies intraday trends and sentiment.
• Acts as dynamic support/resistance.

🔹 How is VWAP Calculated?

VWAP is calculated throughout the day as data updates.

Formula:
VWAP = ∑(Typical Price × Volume) / ∑(Volume)
Typical Price = (High + Low + Close) / 3

Example:
High = ₹102, Low = ₹98, Close = ₹100, Volume = 1000
Typical Price = (102 + 98 + 100) / 3 = ₹100
VWAP = ₹100 × 1000 / 1000 = ₹100

🔹 How to Use VWAP in Trading?

• Buy when price moves above VWAP (bullish sign).
• Sell when price moves below VWAP (bearish sign).
• Institutional traders aim to buy below VWAP and sell above it.
• Use VWAP as a dynamic support/resistance level.

🔹 VWAP vs Moving Averages

Feature	VWAP	Moving Averages
Volume-Based	✅ Yes	❌ No
Daily Reset	✅ Yes	❌ No
Use Case	Intraday	Multi-timeframe
Type of Traders	Day Traders	Swing/Long-term

🔹 Types of VWAP

• Standard VWAP – Resets every day.
• Anchored VWAP – Starts from a specific candle/date/event.
• Rolling VWAP – Averages over N recent periods.

🔹 VWAP in TradingView

Steps:

• Open chart
• Click on “Indicators”
• Search “VWAP” and apply it

🔹 Sample Trading Strategies

🟢 Bullish VWAP Strategy

• Buy when price crosses above VWAP with volume.
• Target: Next resistance
• Stop-loss: Below VWAP

🔴 Bearish VWAP Strategy

• Sell when price falls below VWAP with strong red candle.
• Target: Next support
• Stop-loss: Above VWAP

🔹 Pros and Cons of VWAP

Pros	Cons
Combines price and volume	Only intraday use
Used by institutions	Lags in strong trends
Works as support/resistance	Not suitable for long-term investing

🔹 Best Timeframes to Use VWAP

• 1-min to 15-min charts for best results.
• Most traders prefer 5-minute.
• Always combine with other indicators like MACD/RSI.

🔹 Anchored VWAP (Advanced)

Anchored VWAP starts from a significant event such as:

• Earnings
• Breakouts or gaps
• Swing highs/lows

✔️ Pro Tip: Use VWAP along with price action and volume to avoid false signals.

✅ Summary

Indicator	VWAP (Volume Weighted Average Price)
Use	Intraday entry/exit, trend detection
Formula	(TP × Volume) / Total Volume
Best Timeframe	1–15 minute charts
Combines With	RSI, MACD, candlesticks