What Is VWAP? How Traders Use the VWAP Indicator
VWAP is the average price at which trades went through today, weighted by volume. Both big players and day traders watch it. Here's what it shows and how to read it.
What it is
VWAP (volume weighted average price) is the average price weighted by volume. If 10 coins were bought at $100 and 90 coins at $110, VWAP will be closer to $110: about $109. A simple average would show $105.
Classic VWAP is calculated from the start of the trading session and resets every day. In crypto, where trading runs around the clock, traders usually use the start of the UTC day or set their own anchor point.
VWAP vs. moving average
| VWAP | Moving average | |
|---|---|---|
| Accounts for volume | Yes | No (for a simple one) |
| Period | From the start of the session | Last N candles |
| Most often used | Intraday | On any timeframe |
How it's read
- Price above VWAP: on average, today's buyers are in profit and have the upper hand.
- Price below VWAP: sellers have the upper hand.
- A return to VWAP: often a zone where the price finds support or resistance.
- Large participants use VWAP to judge how well their orders were executed.
VWAP is mainly a tool for day trading. For longer trades, moving averages on the daily chart are more useful. How to approach indicators is covered in the lesson indicators without the obsession. Whatever indicator you use, a stop-loss is mandatory.
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- VWAP is the volume-weighted average price for the session.
- Above VWAP, buyers have the edge; below it, sellers do.
- It's an intraday tool, not for the long term.
Frequently Asked Questions
Which timeframe should I watch VWAP on?
Usually intraday ones: 5 minutes, 15 minutes, 1 hour. On the daily chart, classic VWAP loses its meaning because it resets every session.
What is anchored VWAP?
It's VWAP calculated not from the start of the day but from a chosen point: an important low, a news event, an earnings report. It shows the average price of everyone who bought after that event.
Can I trade with VWAP alone?
It's not a good idea. It's a reference point that works better together with levels and volume. Don't open a trade without a stop-loss.
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