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VWAP, explained simply
If you averaged the day's prices minute by minute, you'd treat a sleepy lunchtime tick the same as a frantic opening bar where millions of shares traded. VWAP fixes that. It's the average price of the day weighted by how much actually traded at each price — and it's one of the most-watched lines on an intraday chart.
The idea in one formula
VWAP — volume-weighted average price — is simply:
Add up price × volume for every trade so far today, divide by the total volume, and you get VWAP. Because it's weighted by volume, the prices where lots of shares changed hands count more — so VWAP sits near where the real money traded, not where the tape happened to tick during a quiet stretch.
Why traders live by it
- An execution benchmark. A desk told to buy a large position is often judged against VWAP: filling below the day's VWAP means they bought better than the average participant. Whole algorithms exist just to track it.
- An intraday fair-value line. Price trading persistently above VWAP suggests buyers are in control on the session; below, sellers. Many use it as dynamic support or resistance.
VWAP is the day's average price, but weighted by volume — so it leans toward the prices where trading was heaviest. It answers "did I get a good fill?" and "who's winning today?"
The fine print
VWAP resets each session — it's an intraday measure, not a multi-day trend line — and it naturally lags, since it's an average of everything that came before. It won't call tops or bottoms. But as a single, honest reference for "where did this thing really trade today," few numbers are watched more closely.