On This Page
Key Takeaways
- VWAP divides cumulative traded value by cumulative volume.
- Session VWAP starts at the selected session boundary; anchored VWAP starts at a chosen event.
- The example’s 1,000 shares trade for $50,000, producing a $50.00 VWAP.
- Compare current price and average fills with the same defined VWAP window.
- Volume determines each observation’s weight in the calculation.
What is volume-weighted average price (VWAP)?
Volume-weighted average price, or VWAP, is the total traded value divided by traded quantity over a defined window. Larger executions contribute more weight to the average, so VWAP reflects the average price paid per share across that window. Traders use it as an intraday benchmark for price location and execution quality.
Session VWAP accumulates from the selected session start. Anchored VWAP starts at a chosen event, such as an earnings gap or swing point, and can span multiple sessions.
Formula
VWAP = sum(price_i × volume_i) / sum(volume_i)- price_i is the price assigned to trade or interval i.
- volume_i is the executed share or contract volume for that trade or interval.
- The sums run from the selected session start through the current observation.
How to calculate VWAP: a three-trade example
XYZ records three eligible intraday trades: 100 shares at $50.00, 300 shares at $50.20, and 600 shares at $49.90.
- Price-times-volume: $5,000 + $15,060 + $29,940 = $50,000
- Cumulative volume: 100 + 300 + 600 = 1,000 shares
- VWAP: $50,000 / 1,000 = $50.00
- Current trade price: $49.90, or $0.10 below VWAP
The 600-share execution receives six times the weight of the 100-share execution. The three trades total $50,000 across 1,000 shares, producing a $50.00 VWAP. The last trade is ten cents below that average.
XYZ trades 100 shares at $50, 300 at $50.20 and 600 at $49.90. The traded values are $5,000, $15,060 and $29,940. Together they total $50,000 across 1,000 shares.
VWAP is $50.00. The final $49.90 trade sits ten cents below it. The 600-share trade has six times the weight of the 100-share trade.
Example: a fourth trade and an anchored VWAP
Append 400 shares at $50.50 to the three-trade example. Traded value rises to $70,200 and quantity to 1,400 shares, giving session VWAP $50.14. Anchor at the second trade and include it: the last three trades contribute $65,200 across 1,300 shares, giving AVWAP $50.15.
The same executions produce different references because the windows differ. A zero-volume window has no VWAP, and excluding the anchor observation changes the result. Fees affect execution economics but do not change the market-price benchmark. See our window and input conventions.
Move the anchor. Compare VWAP.
VWAP Calculator with an Inclusive Anchor
Row 1 is the first trade. The anchored VWAP includes this row.
- Full-Session Traded Value / Quantity
- $70,200 / 1,400
- Session VWAP
- $50.14
- Anchored Value / Quantity
- $65,200 / 1,300
- Anchored VWAP
- $50.15
| Execution | Price | Shares | Traded Value | In Anchor? |
|---|---|---|---|---|
| Execution 1 | $50.00 | 100 | $5,000 | No |
| Execution 2 | $50.20 | 300 | $15,060 | Yes |
| Execution 3 | $49.90 | 600 | $29,940 | Yes |
| Execution 4 | $50.50 | 400 | $20,200 | Yes |
Model: Volume-weighted averageHypothetical inputs. The selected anchor row is included. Add fees when grading a fill. Full Convention
VWAP on a price chart
Trade-level VWAP uses execution prices and quantities. The chart example uses each bar’s typical price, calculated as (high + low + close) / 3, weighted by bar volume.
The fourteen-bar example finishes with a $41.05 VWAP and a $41.20 close. Earlier volume stays in the cumulative calculation as later trades arrive.
Session selection, eligible trades and the price input define the calculation. Compare values that use the same window and inputs.
How traders use VWAP
A buy order averaging $25.04 against a $25.08 VWAP executes four cents below that benchmark. Multiplying the difference by the filled quantity converts it to dollars.
Read price location, the slope of the line and the surrounding volume together. Time and sales supplies the individual prints; volume profile organizes activity by price.
As the stock tests VWAP, options flow shows which side the large orders take, and the options profit calculator compares premium and payoff across the contracts on your shortlist.
Limitations of VWAP
- Match the window and inputs before comparing values. Session or anchored start, regular or extended hours, eligible trades and trade-level or bar-based prices can each give a different VWAP for the same executions.
- Anchor a fresh VWAP when the late session needs a faster reference. Session VWAP is cumulative, so earlier volume stays in the average and later prices move it less as the session goes on.
- Read location with the slope and the volume. Price above or below VWAP gives location; the line’s slope and the surrounding volume complete the read.
- Start the window at the first trade. A zero-volume window has no VWAP.
- Add fees when you grade a fill. They do not change the benchmark, so a fill below VWAP can still cost more once fees are included.
Bottom line
VWAP is the day’s fair price by volume, the benchmark execution desks grade their fills against. Compare price and fills only with a VWAP built on the same window and inputs, and read where price sits together with the line’s slope and the volume around it.
Clear answers
Frequently Asked Questions
Sources and Further Reading
- Charles Schwab: How to Use Volume-Weighted Indicators in Trading
- Fidelity: Corporate Actions Glossary, Volume Weighted Average Price
How entries are sourced, calculated and updated: editorial methodology.