Key takeaways
- VWAP is the session's average price weighted by traded volume at each price level.
- It is not a simple mid-point between high and low.
- Traders use VWAP as an execution benchmark: did I buy cheaper or sell richer than the day's volume-weighted average?
What VWAP measures
Volume-Weighted Average Price multiplies each trade's price by its size, sums those values, and divides by total volume. Heavy trading at a price pulls VWAP toward that level.
A quiet print at an extreme high or low moves VWAP less than a large block in the middle of the day's volume.
How investors use it
Institutional desks often judge execution quality versus VWAP. Buying below VWAP (or selling above it) is commonly framed as favourable execution relative to that day's flow.
Retail investors can still use VWAP as context: a last price far from VWAP can signal that recent prints are away from where most volume actually traded.
Limits
VWAP is a same-session statistic. It does not tell you intrinsic value, and it resets with each trading day.
In thinly traded names, VWAP can be jumpy because a few prints dominate the volume weight, another reason free float and liquidity matter.
FAQs
Is VWAP the same as the closing price?
No. The close is the last matched trade (subject to closing auction rules). VWAP reflects the whole session's volume-weighted average.
Can VWAP predict tomorrow's price?
No. It summarises today's traded flow. It is a benchmark and context tool, not a forecast.