Understanding Volume Weighted Average Price
Volume Weighted Average Price (VWAP) is a technical analysis indicator used to measure the average price of a stock over a given period, weighted by volume. It serves as a reference point for traders, especially institutional investors, to evaluate the execution quality of their orders. VWAP is often used to determine if an order was executed at a favorable price relative to the day's volume. When the price is below the VWAP it indicates buying pressure. When the price is above the VWAP it indicates selling pressure.
Worked Example: These Figures Today
The companies used as examples above, with the live figures behind them. Illustrations of the metric — not a ranking, not a shortlist, and not a recommendation.
| Ticker | Company | Price | Change | Market Cap | P/E | MoonshotScore |
|---|---|---|---|---|---|---|
| AAPL | Apple Inc. | $332.61 | +1.85% | $4.9T | 37.5 | 89 |
| TSLA | Tesla, Inc. | $363.56 | -1.16% | $1.4T | 308.1 | 53 |
| NVDA | NVIDIA Corporation | $218.36 | -2.37% | $5.3T | 27.5 | 91 |
VWAP in Trading Strategy
VWAP is used by traders to identify the general direction of intraday price movement. Institutional investors use VWAP to execute large orders without significantly moving the market price, buying below the VWAP and selling above it. It helps assess the efficiency of order execution and can be used in algorithmic trading strategies. VWAP is often used in conjunction with other indicators to generate buy and sell signals.
VWAP indicates the average price of a stock weighted by its volume. It shows whether you are buying or selling above or below the average price during the day.
A 'good' VWAP depends on the trader's objective. Institutional investors often aim to buy below VWAP and sell above it to minimize market impact and achieve favorable execution prices. For other traders, a good VWAP depends on their entry and exit points.
VWAP is generally considered a lagging indicator because it uses historical price and volume data to calculate the average price. However, it can also be used in a forward-looking manner to assess current price levels relative to the day's average trading price.
“MoonshotScore rates a US-listed stock 0 to 100 — higher means stronger numbers. Most carry an older nine-factor score; the rest use five sector-relative pillars, re-ranked daily — common stocks and ADRs only. Funds, ETFs, warrants, units, SPACs, preferreds, and notes carry none. It is built for education and deeper due diligence, not financial advice.”
Questions worth resolving before acting on the screen
What does VWAP tell you?
Review the underlying financial statements and risk factors before making any decision.
What is considered a good VWAP?
Review the underlying financial statements and risk factors before making any decision.
Is VWAP a leading or lagging indicator?
Review the underlying financial statements and risk factors before making any decision.