Volume-Weighted Average Price (VWAP)
Original schematic showing the guide's principal visual relationships.
VWAP = cumulative sum(Typical Price × Volume) ÷ cumulative Volume.
Formula and components
The session's cumulative average traded price weighted by volume.
VWAP = cumulative sum(Typical Price × Volume) ÷ cumulative Volume.
How it works
The indicator transforms price, range, or volume observations over a selected lookback. Shorter settings react faster but create more noise; longer settings respond more slowly and emphasize the underlying regime. Always compare the reading with price structure and timeframe.
How to read it
Price above session VWAP indicates trading above the volume-weighted mean; slope and repeated tests provide intraday context.
Practical example
During a session, price reclaims a rising VWAP and repeatedly holds it on pullbacks. That shows trading above the session's volume-weighted mean; the signal resets the next day and should not be treated as long-term value.
Confirmation checklist
Confirm that participation supports the price move and compare like-for-like sessions. One unusual print or event-driven spike should not define the entire signal.
Limitations and false signals
Standard VWAP resets each session and becomes increasingly lagged as the day progresses. It is not a long-term fair-value estimate.
Limitations and false signals
Frequently asked questions
What does this pattern or indicator describe?
The session's cumulative average traded price weighted by volume.
How should the signal be confirmed?
Price above session VWAP indicates trading above the volume-weighted mean; slope and repeated tests provide intraday context. Confirm that participation supports the price move and compare like-for-like sessions. One unusual print or event-driven spike should not define the entire signal.
What can cause a false signal?
Standard VWAP resets each session and becomes increasingly lagged as the day progresses. It is not a long-term fair-value estimate.