Volume Weighted Average Price - VWAP

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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)

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.

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