Volume Weighted Average Price - VWAP

AAA

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)

VIDEO

Loading the player...

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.

RELATED TERMS
  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.
Related Articles
  1. 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.
  2. Retirement

    The Investing Risk Of Underfunded Pension Plans

    Determine the risk to a company's EPS and financial condition resulting from an underfunded pension plan.
  3. Forex Education

    Trading With VWAP And MVWAP

    Volume weighted average price (VWAP) and moving volume weighted average price (MVWAP) are trading tools that can be used by all traders to make sure they are getting the best price.
  4. Investing

    How To Evaluate Pension Risk By Analyzing Annual Costs

    Learn how to assess whether a company's pension plan is posing more risks than what the footnotes indicate.
  5. Term

    What are Pension Funds?

    A pension fund is a company-sponsored fund that provides income for employees in retirement.
  6. Technical Indicators

    Use Market Volume Data to Determine a Bottom

    Market bottoms often carve out classic volume patterns that let observant traders make fast and accurate calls.
  7. Mutual Funds & ETFs

    ETF Analysis: First Trust Dorsey Wright Focus 5

    Take a closer look at the First Trust Dorsey Wright Focus 5 ETF, a unique and innovative fund of funds based on momentum and relative strength.
  8. Retirement

    Retirement Planning for Entrepreneurs and Small Businesses

    If your business has receiveables, here's a smart way to leverage them to build up your retirement fund fast.
  9. Retirement

    Overhaul Social Security to Fix Retirement Shortfall

    There are several theories and ideas about how we can make up for the $6.6 trillion retirement savings shortfall in America. Adjustments to Social Security and our retirement savings plans are ...
  10. Technical Indicators

    4 Ways to Find a Penny Stock Worth Millions

    Thinking of trading in risky penny stocks? Use this checklist to find bargains, not scams.
RELATED FAQS
  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 >>
  5. Can my IRA be garnished for child support?

    Though some states protect IRA savings from garnishment of any kind, most states lift this exemption in cases where the account ... Read Full Answer >>
  6. Can I use my IRA savings to start my own savings?

    While there is no legal reason why you cannot withdraw funds from your IRA to start a traditional savings account, it is ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Bubble Theory

    A school of thought that believes that the prices of assets can temporarily rise far above their true values and that these ...
  2. Stock Market Crash

    A rapid and often unanticipated drop in stock prices. A stock market crash can be the result of major catastrophic events, ...
  3. Financial Crisis

    A situation in which the value of financial institutions or assets drops rapidly. A financial crisis is often associated ...
  4. Election Period

    The period of time during which an investor who owns an extendable or retractable bond must indicate to the issuer whether ...
  5. Shanghai Stock Exchange

    The largest stock exchange in mainland China, the Shanghai Stock Exchange is a nonprofit organization run by the China Securities ...
  6. Dead Cat Bounce

    A temporary recovery from a prolonged decline or bear market, followed by the continuation of the downtrend. A dead cat bounce ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!