VWAP Indicator: Formula, Interpretation, and Anchored VWAP
VWAP (Volume Weighted Average Price) is an intraday benchmark line that weights each price by the volume traded at that price, giving a single running average that institutional desks use to evaluate execution quality. This cluster covers the exact calculation, how to read price position relative to VWAP, what VWAP slope signals, and how anchored VWAP extends the concept beyond the daily session reset to any user-chosen starting event.
VWAP Foundations
Reading VWAP
Anchored VWAP
Frequently Asked Questions
What is VWAP?
VWAP (Volume Weighted Average Price) is a single-session benchmark calculated by dividing the cumulative product of each bar's typical price and its traded volume by the cumulative volume for that session. It appears as a running line on an intraday chart and resets to zero at the start of each new regular trading day. Institutional traders use it to assess whether they bought or sold at a favorable price relative to the day's volume-weighted average.
How is VWAP calculated?
VWAP is calculated by multiplying each bar's typical price (the average of its high, low, and close) by the volume traded in that bar, summing those products from the session open to the current bar, and dividing that cumulative sum by the total volume traded so far. Because both the numerator and denominator grow with each new bar, the line smooths over the session rather than jumping with each tick.
What is anchored VWAP?
Anchored VWAP is a variant that lets the trader choose any starting bar rather than always beginning at the session open. Common anchor points include earnings release dates, major gap days, significant swing highs and lows, or the start of a new fiscal quarter. Because the anchor can be placed on any meaningful price event, anchored VWAP can persist across multiple sessions, unlike standard daily VWAP which resets every morning.