Volume Weighted Average Price - VWAP


DEFINITION of 'Volume Weighted Average Price - VWAP'

A trading benchmark used especially in pension plans. VWAP is calculated by adding up the dollars traded for every transaction (price multiplied by number of shares traded) and then dividing by the total shares traded for the day.

Volume Weighted Average Price (VWAP)


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BREAKING DOWN 'Volume Weighted Average Price - VWAP'

The theory is that if the price of a buy trade is lower than the VWAP, it is a good trade. The opposite is true if the price is higher than the VWAP.

  1. Volume

    The number of shares or contracts traded in a security or an ...
  2. Weighted Average

    An average in which each quantity to be averaged is assigned ...
  3. Pension Plan

    A type of retirement plan, usually tax exempt, wherein an employer ...
  4. Weighted

    A mathematical process by which figures and/or components are ...
  5. Per Share Basis

    A measure used in the financial world to illustrate the quantity ...
  6. Valium Picnic

    A market holiday or a slow trading day.
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  1. What is a common strategy traders implement when using the Time Segmented Volume ...

    A trader uses time segmented volume (TSV) to compare volumes in different time frames. It is a leading indicator because ... Read Full Answer >>
  2. What is a common strategy traders implement when using the Volume Weighted Average ...

    Using the volume-weighted average price (VWAP) when trading in short-term time frames is highly effective and simple. One ... Read Full Answer >>
  3. Why is the Volume Weighted Average Price (VWAP) important for traders and analysts?

    Volume-weighted average price (VWAP) is an important tool that traders use to gauge whether a stock was bought or sold at ... Read Full Answer >>
  4. How do I figure out my cost basis on a stock investment?

    The cost basis of any investment is the original value of an asset adjusted for stock splits, dividends and capital distributions. ... Read Full Answer >>
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