Trading term

What is VWAP (Volume-Weighted Average Price)?

VWAP is the average price a security has traded at during the day, weighted by volume — so prices where more shares changed hands count for more. It's a single intraday line traders use as a fair-value benchmark and to judge whether they're buying above or below the day's average.

VWAP resets at the start of each session and builds through the day: every trade is weighted by its volume, so a large block at $50 moves the line more than a tiny trade at $51. The result is a single line representing the volume-weighted 'average cost' of everyone trading that day. Because it's anchored to the session, it's mainly an intraday tool, favoured by day traders and large institutions.

Its main use is as a benchmark and a dynamic level. Institutions aim to buy below VWAP and sell above it to prove they got a good average price, so it becomes a magnet and an intraday support/resistance line. For a trader, price above a rising VWAP signals bullish control for the day; price below suggests sellers are in charge. It's less useful over multi-day horizons, since it resets daily.

VWAP as intraday support
VWAPbounces off VWAP → support

Price trades above a rising VWAP — the volume-weighted average price for the day — dips to touch it mid-session, and bounces, with buyers defending the day's average.

For example

A day trader sees a stock dip to its VWAP line at $49.80 mid-morning and bounce — buyers defended the day's average price — confirming VWAP is acting as intraday support.

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Why it matters to you

VWAP is the benchmark professionals are measured against, which is exactly why it works: because so many institutions trade around it, it becomes a self-reinforcing intraday level. For a trader, it's a clean, objective read on whether the day belongs to buyers or sellers.

⚠ It's an intraday tool

VWAP resets every session, so applying it like a multi-day moving average misreads it. A 'price above VWAP' signal is about today's control, not the longer trend. Using standard daily VWAP for swing trades — where it's been reset many times — is a common misuse; anchored VWAP is the tool for longer horizons.

Frequently asked questions

What's the difference between VWAP and a moving average?

A moving average weights each period's price equally and rolls over a fixed window across days. VWAP weights by volume and resets each session, so it reflects the day's true average trading price. VWAP is an intraday benchmark; moving averages track trend over longer horizons.

How do traders use VWAP?

As a benchmark and a dynamic level. Institutions try to buy below VWAP and sell above it to beat the day's average. Day traders read price above a rising VWAP as bullish intraday control and below it as bearish, and watch the line for intraday support and resistance.

Why does VWAP reset each day?

VWAP is designed as a session benchmark — the volume-weighted average price for that specific trading day — so it starts fresh each morning. That daily reset is what makes it an intraday tool. For multi-day analysis, traders use 'anchored VWAP,' which starts from a chosen point like a major high or low.

Is VWAP good for day trading?

It's one of the most popular day-trading tools precisely because it's intraday by design. It gives a clear, objective fair-value benchmark, acts as intraday support/resistance, and shows whether buyers or sellers control the session. Its usefulness fades over multi-day horizons because it resets daily.

Related terms

Ascending triangleAn ascending triangle is a bullish continuation pattern: a flat horizontal resistance line on top, with a rising trendline of higher lows beneath it. As the higher lows squeeze price against the ceiling, pressure builds — and it usually resolves with a breakout up through the resistance.ATR (Average True Range)ATR (Average True Range) measures how much a security typically moves in a period — its volatility — as an average of recent trading ranges. It doesn't say which direction price is heading, only how far it tends to travel, which makes it a core tool for stop-losses and position size.Bollinger BandsBollinger Bands wrap a price chart in three lines: a middle moving average with an upper and lower band set two standard deviations away. The bands widen when volatility rises and squeeze together when it falls, framing whether price is relatively high or low.BreakdownA breakdown is when price falls decisively through a support level it had been holding above — the bearish mirror of a breakout. It signals sellers have overwhelmed the buyers defending support, and often triggers a fast move lower as stops and new sellers pile in.
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