TradingIntermediate#Technical Analysis#Benchmarks
VWAP (Volume Weighted Average Price)
V
Definition
The average price an asset has traded at throughout the day, based on both volume and price. Used as a benchmark for institutions.
Verified by CryptoLV Alpha
Concept Diagram
Key Takeaways
1
VWAP calculates the average price weighted by trading volume giving more weight to high-volume periods
2
Institutional traders benchmark their execution quality against VWAP
3
Buying below VWAP indicates good execution while buying above VWAP indicates poor execution
4
VWAP algorithms adjust order sizes based on historical volume patterns to minimize market impact
Practical Example
An institution buys 500 BTC throughout the day with an average price of $60,200. The day's VWAP is $60,100. Since they bought $100 above VWAP (0.17%), their execution was slightly worse than average — but acceptable for the large size.
Finished learning?
Related Terms
Market Structure
Institutional Funding CandleA specific candle that marks where a large institution began to fund a massive move, often serving as a future 'Point of Interest'.
Strategy
TWAP (Time Weighted Average Price)An algorithmic execution strategy that spreads a large order over a fixed period to minimize market impact.
Trading
Point of Control (POC)The price level with the highest traded volume for a particular time period in the volume profile.
Trading
Candlestick ChartA financial chart used to describe price movements of a security over time, showing Open, High, Low, and Close values.
Related Deep Dives
Master the hub of Trading
Explore all our strategic guides about Trading to take your operations to the next level.
View all articles