VWAP

VWAP stands for volume weighted average price. It is a single line plotted on an intraday chart that shows the average price a stock has traded at so far that day, with each trade weighted by how many shares changed hands at that price. A price where 500,000 shares traded pulls the average toward it much more than a price where only 2,000 shares traded.

It works by running a calculation from the market open: multiply each trade's price by its volume, add all of those up, and divide by the total volume traded so far. As the day goes on, more data feeds into the calculation, so the VWAP line updates continuously and typically smooths out as volume accumulates. Because it resets every session, VWAP is only ever showing you "today's" story — it does not carry over from the previous day.

The nuance that trips people up is that VWAP is not a moving average in the usual sense (like a 20-period simple moving average), because it is not just averaging price over time — it is averaging price weighted by volume, and it only looks backward from the day's open to the current bar. It also is not a predictive signal by itself; it is a reference point. Many traders watch price relative to VWAP (above it, below it, or reclaiming it) rather than the VWAP value itself.

Institutions also use VWAP as a benchmark for execution quality: if a large buy order gets filled at a price below VWAP, that is generally considered a good execution, and above VWAP a worse one, since the goal is often to trade in line with or better than the day's volume-weighted average.