TradingIntermediate#Technical Analysis#Benchmarks
VWAP (Volume Weighted Average Price)
V
Definition
A price-volume average calculated over a specified venue, asset, data source, and time window. It is a descriptive benchmark, not a universal fair value or trading signal.
Source reviewed
- FINRA: Trade reporting FAQ opens in a new tab
Supports: FINRA describes end-of-day VWAP as an actual execution price and gives examples of weighted-average pricing based on underlying trades.
- SEC: VWAP calculation opens in a new tab
Supports: SEC describes VWAP calculation by multiplying transaction price by quantity and using the resulting volume-weighted average.
Concept Diagram
Key Takeaways
1
VWAP is a disclosed price-volume calculation over a selected data source and session
2
A raw VWAP comparison needs side, size, urgency, liquidity, fees, and constraints for context
3
Above or below VWAP does not prove execution quality, fair value, mean reversion, or trend
4
Do not infer an institution, price target, or profitable trade from a VWAP reading
Practical Example
A researcher defines an asset, venue, session, and price-volume calculation before comparing an execution. They report the resulting VWAP alongside side, order size, urgency, fees, liquidity, and market conditions, without calling a higher or lower result good, bad, or predictive.
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Related Terms
Market Structure
Institutional Funding CandleAn informal name for a selected candle before a later move. A candle cannot identify the trader, capital source, or an institutional decision behind that move.
Strategy
TWAP (Time Weighted Average Price)An execution method that schedules parts of an order across a defined time interval. Its schedule, sizing, slippage controls, fill behaviour, and result are venue- and configuration-specific.
Trading
Point of Control (POC)The price bin with the highest reported traded volume in a selected volume-profile calculation. It depends on the venue, data, binning method, and time window chosen.
Trading
Candlestick ChartA chart that summarizes the open, high, low, and close recorded for a chosen market, data feed, and time interval. It describes past price observations; it does not reveal the identities, motives, or future actions of market participants.
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