What is the 'Volume Weighted Average Price  VWAP'
The volume weighted average price (VWAP) is 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.
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.
BREAKING DOWN 'Volume Weighted Average Price  VWAP'
Volumeweighted average price (VWAP) is a ratio generally used by institutional investors and mutual funds to make buys and sells so as not to disturb the market prices with large orders. It is the average share price of a stock weighted against its trading volume within a particular time frame, generally one day.
VWAP Explained
Large institutional investors or investment houses that use VWAP base their calculations off every tick of data during a trading day. In essence every closed transaction is recorded. However, most charting websites and individual investors may prefer to use oneminute or fiveminute trading prices in order to cut down on the sheer volume of data required to keep track of VWAP in a day. For a fiveminute VWAP calculation you would take the low, plus the high, plus the closing price within the fiveminute period and divide the total by three. This gives you a timeweighted average price (TWAP) that is fairly accurate, and you can multiply this number by the volume traded in the same period to achieve a weighted price.
Why Use VWAP
Large institutional buyers and mutual funds use the VWAP ratio to be able to move into stocks in a way that will not disturb the natural market dynamics of a stock price. If these buyers were to move into a stock position all at once, it would unnaturally elevate the stock price. Yet buying purchasing shares under the intraday VWAP moving average, these buyers can move into a stock over the course of a day or two without too much price disruption.
However, there are other uses for the VWAP, and one such strategy is to purchase a stock for individual investors just as the VWAP pierces the intraday VWAP moving average, as this can indicate a momentum shift in the share price. It is also used in algorithmic trading and allows brokers to guarantee the execution of a trade near a certain price volume for clients.
VWAP Issues
VWAP is cumulative indicator and as such the number of data points increases throughout the day. This increasing dataset, over longer periods of time, such as four, six or eight hours in a day can cause lag between the VWAP moving average and the actual VWAP. As such, most investors never use a VWAP longer than one day.

VWAP Cross
A trading indicator that occurs when the current price crosses ... 
Intraday
Another way of saying "within the day". Intraday price movements ... 
Linearly Weighted Moving Average
A type of moving average that assigns a higher weighting to recent ... 
Volume
The number of shares or contracts traded in a security or an ... 
Volume Of Trade
The total quantity of futures contracts bought and sold during ... 
Down Volume
A stock volume that closes at a price lower than the previous ...

Retirement
Calculating Volume Weighted Average Price
Volume weighted average price, or VWAP, is the average value of a stock traded over the course of a set time horizon, which is typically one day. 
ETFs & Mutual Funds
ETFs: Utilizing VWAP to Trade in a LowVolume Market (SPY, IWM)
Explore information about the VWAP, and learn how to calculate a security's VWAP and how to use the indicator to determine entry and exit points. 
Trading
Basics of Algorithmic Trading: Concepts and Examples
Algorithmic trading makes use of computers to trade on a set of predetermined instructions to generate profits more efficiently than human traders. 
Trading
How To Tackle Intraday Volume
Measure the flow of intraday volume to estimate the emotional intensity of the crowd. 
Trading
Interpreting Volume For The Futures Market
Learn how to read the volume reports, look at the relation to liquidity and interpret volume using open interest. 
Trading
What The Market Open Tells You
The first few moments of trading provide a lot of information. If a trader analyzes this information, it can give a lot of insight into the market's moves for the day. 
Trading
A Guide To Finding The Most Actively Traded Stocks
Knowing the trading volume of a stock helps traders understand price movements and forecast future movements. This short guide helps investors locate actively traded data. 
Trading
Weighted Moving Averages: The Basics
We take a closer look at the linearly weighted moving average and the exponentially smoothed moving average. 
Investing
How To Use A Moving Average To Buy Stocks
The Moving Average indicator is one of the most useful tools to trade and analyze financial markets. 
Trading
How To Use Volume To Improve Your Trading
The basic guidelines to analyzing volume may not apply in all situations, but overall, they can help direct entry and exit decisions.

Why is the Volume Weighted Average Price (VWAP) important for traders and analysts?
Learn how traders use the VWAP to calculate the average price weighted by volume and to analyze the momentum of trading on ... Read Answer >> 
What is a common strategy traders implement when using the Volume Weighted Average ...
Find out about a common strategy that traders use with the volumeweighted average price, including the use of VWAP with ... Read Answer >> 
What are the best technical indicators tocomplement the Volume Weighted Average Price ...
Examine a few indicators and oscillators that could be used to complement the volumeweighted average price (VWAP) in a technical ... Read Answer >> 
What is a common strategy traders implement when using the Uptick Volume?
Learn how traders use uptick and downtick volume with VWAP cross to identify trends and momentum and identify points of big ... Read Answer >> 
What is a common strategy traders implement when using the Volume Price Trend Indicator ...
Learn how a trader can use the volume price trend indicator as a strategy to identify changes in trends and how it can be ... Read Answer >> 
What is a common strategy traders implement when using the Ultimate Oscillator?
Learn what the ultimate oscillator is and find out about a common strategy traders use with the oscillator to signal entries ... Read Answer >>