GlossaryVWAP
VWAP
A volume-weighted average price over a rolling window of the last 200 candles. Unlike with a moving average, each candle counts according to its turnover, so the line sits where trading actually took place in the window. The price's distance from it shows whether the average entry of this window is in profit or at a loss.
How to read it
The line's color shows where the last close stands: green if it is at or above the current VWAP, red if it is below. The entire line changes color, not individual sections. With Study colors turned off, it takes the chosen color.
You measure the price's distance from the line in percent of the VWAP:
- Price above the line: Anyone who bought at the average price in the window is in profit. Pullbacks often stall at the line.
- Price below the line: The average entry is at a loss. The line often acts as resistance from below, because many traders get back to their entry there.
- Slope: If the line rises, more recent trading took place at higher prices than at the start of the window.
What the window covers depends on the timeframe: 200 hourly candles are a little over eight days, 200 daily candles about six and a half months, 200 weekly candles almost four years.
Limitations
- Approximation: A true VWAP weights each individual trade by its price. Here, each candle is represented by a single price, the typical price. For candles with a large range, the actual traded average can differ from this.
- No volume, no line: Symbols with no reported volume, such as some indexes or forex pairs, draw no VWAP.
- Entry is a figure of speech: Every trade has a buyer and a seller. “Average entry” means the volume-weighted price at which trading took place in the window, not the actual position of individual market participants.