Vwap Calculator
Calculate Volume Weighted Average Price for intraday trading support and resistance levels. Enter values for instant results with step-by-step formulas.
Reviewed for accuracy by Daniel Agrici, Founder & Lead Developer
Vwap Calculator
Calculator
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Formula: VWAP = Sum(Typical Price x Volume) / Sum(Volume)
Worked example — VWAP = 149.9677 | Period 2 (highest volume) has the most weight in the calculation
Formula
VWAP = Sum(Typical Price x Volume) / Sum(Volume)
Where Typical Price = (High + Low + Close) / 3 for each period. The calculation is cumulative from the session open. VWAP bands are calculated using standard deviations of the volume-weighted price distribution around the VWAP line.
Worked Examples
Example 1: Intraday VWAP Calculation
Problem:A stock trades through 3 periods: Period 1 (H:150, L:148, C:149, Vol:50000), Period 2 (H:151, L:149, C:150, Vol:60000), Period 3 (H:152, L:150, C:151, Vol:45000). Calculate VWAP.
Solution:TP1 = (150+148+149)/3 = 149.00, TPV1 = 149.00 x 50,000 = 7,450,000 TP2 = (151+149+150)/3 = 150.00, TPV2 = 150.00 x 60,000 = 9,000,000 TP3 = (152+150+151)/3 = 151.00, TPV3 = 151.00 x 45,000 = 6,795,000 Cumulative TPV = 23,245,000 Cumulative Volume = 155,000 VWAP = 23,245,000 / 155,000 = 149.9677
Result:VWAP = 149.9677 | Period 2 (highest volume) has the most weight in the calculation
Example 2: VWAP Band Trading Signal
Problem:Current VWAP is 150.00 with standard deviation of 1.25. Current price is 152.60. Determine trading signal based on VWAP bands.
Solution:Upper Band 1 (+1 SD) = 150.00 + 1.25 = 151.25 Upper Band 2 (+2 SD) = 150.00 + 2.50 = 152.50 Lower Band 1 (-1 SD) = 150.00 - 1.25 = 148.75 Lower Band 2 (-2 SD) = 150.00 - 2.50 = 147.50 Price 152.60 > Upper Band 2 (152.50) Price is above 2nd standard deviation = Overbought territory
Result:Signal: Overbought | Price at 152.60 exceeds +2SD band at 152.50 | Mean reversion likely
Frequently Asked Questions
What is VWAP and why do traders use it?
VWAP stands for Volume Weighted Average Price, which calculates the average price a security has traded at throughout the day, weighted by volume at each price level. Institutional traders use VWAP as a benchmark to determine whether they received a good execution price on their orders. If they bought below the VWAP, they got a better-than-average price for the day. Day traders use it as a dynamic support and resistance level, since price tends to gravitate toward VWAP. It resets at the start of each trading session, making it purely an intraday indicator that reflects the true average price paid by all market participants.
How is VWAP calculated step by step?
VWAP is calculated by first finding the Typical Price for each period, which equals the sum of the High, Low, and Close prices divided by three. Next, you multiply each Typical Price by its corresponding Volume to get the price-volume product for that period. You then create a running cumulative total of these price-volume products and a running cumulative total of volume. Finally, you divide the cumulative price-volume total by the cumulative volume at each point in time. This running calculation means VWAP constantly adjusts throughout the day as new price and volume data comes in, with high-volume periods having more influence on the final value.
What are VWAP bands and how are they used?
VWAP bands are standard deviation envelopes plotted above and below the VWAP line, similar to Bollinger Bands but anchored to VWAP instead of a moving average. The first standard deviation bands contain approximately 68 percent of price action, while the second standard deviation bands contain about 95 percent. Traders use the upper bands as potential resistance and overbought zones, and the lower bands as potential support and oversold zones. When price touches the second standard deviation band, mean reversion traders look for a move back toward VWAP. These bands dynamically expand and contract with volatility throughout the trading day.
How does VWAP differ from a simple moving average?
The key difference is that VWAP incorporates volume weighting, while a simple moving average treats every price bar equally regardless of how much trading occurred. This means VWAP gives more weight to price levels where heavy trading took place, making it a more accurate representation of the true consensus price. Additionally, VWAP is cumulative from the session open and never drops old data, whereas moving averages use a fixed lookback window. VWAP also resets daily while moving averages are continuous. Because of volume weighting, VWAP is considered a more reliable support and resistance level since it reflects where actual money changed hands.
What trading strategies use VWAP?
The most common VWAP strategy is the VWAP cross, where traders go long when price crosses above VWAP and short when it crosses below, treating VWAP as a trend filter. Mean reversion strategies involve buying at the lower VWAP band and selling at the upper band, expecting price to return to the average. Institutional execution algorithms use VWAP to break large orders into smaller pieces and execute them throughout the day at prices near the VWAP benchmark. Pullback traders wait for price to retrace to VWAP after a strong move and enter in the direction of the trend when price bounces off the VWAP level.
Why does VWAP reset at the start of each trading session?
VWAP resets daily because it is designed to measure the average price for the current trading session only. Overnight gaps, after-hours trading, and pre-market activity create discontinuities that would distort a multi-day VWAP calculation and make it less meaningful as an intraday benchmark. The daily reset ensures that the indicator accurately reflects current session dynamics and is relevant for same-day trading decisions. Some traders do use anchored VWAP, which starts calculation from a specific significant event like earnings or a major high or low, rather than resetting daily. This anchored version allows multi-day analysis while maintaining the volume-weighted advantage.
How does volume affect VWAP accuracy?
Higher volume periods have a disproportionately large impact on VWAP because the weighting is directly proportional to volume traded at each price level. During the opening hour, when volume is typically highest, VWAP moves rapidly and establishes its initial trajectory for the day. During the midday lull when volume is light, VWAP becomes relatively stable and changes very slowly. The closing hour often sees another volume surge that can shift VWAP significantly. In low-volume securities, VWAP may be less reliable because a few large trades can dramatically move the indicator, while heavily traded stocks produce a more stable and meaningful VWAP.
Can VWAP be used for swing trading or only day trading?
Traditional VWAP is primarily a day trading tool because it resets at each session open, making multi-day analysis impossible with the standard version. However, anchored VWAP solves this limitation by allowing traders to anchor the calculation to any significant price point, such as an earnings date, a breakout candle, or a major swing high or low. This anchored version can span weeks or months and is useful for swing trading and position trading. Some platforms also offer weekly or monthly VWAP that resets on a longer timeframe. These longer-period versions help identify important support and resistance levels for multi-day trades.
What are the limitations of VWAP as an indicator?
VWAP is a lagging indicator because it uses historical price and volume data, meaning it cannot predict future price movements but only shows where price has been relative to volume. As the day progresses, VWAP becomes increasingly anchored to earlier data and responds less to new price action, making it less dynamic in the afternoon. It is also purely an intraday indicator in its standard form, which limits its usefulness for longer timeframes. VWAP works best in liquid, actively traded markets and can give misleading signals in thinly traded or illiquid securities. Additionally, VWAP does not account for gaps or after-hours price movements.
How do institutional traders use VWAP for order execution?
Institutional traders often receive orders to buy or sell large quantities at or better than VWAP as their execution benchmark. They use VWAP algorithms that break a large order into many smaller child orders distributed throughout the trading day to minimize market impact. The algorithm typically front-loads orders during high-volume periods like the open and close, and reduces order size during the low-volume midday period. Performance is then measured by comparing the actual average execution price against the session VWAP. If a buy order achieves an average price below VWAP, the trader outperformed the benchmark. This is why VWAP is sometimes called the institutional fair price level.
References
Reviewed for accuracy by Daniel Agrici, Founder & Lead Developer · Editorial policy
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