GlossaryVolume Weighted Average Price (VWAP)

Volume Weighted Average Price (VWAP)

The VWAP is the volume-weighted average price since the start of the current period: day, week, month or year. It shows the average price traded at in this period and serves many traders as a fair reference price.

Calculation

Each candle enters with its typical price:

P_t = \frac{H_t + L_t + C_t}{3}

$H_t$ is the high, $L_t$ the low, $C_t$ the close of candle $t$ . It is weighted by the volume $V_t$ , summed from the first candle $s$ of the current period:

\mathrm{VWAP}_t = \frac{\sum_{i=s}^{t} P_i\,V_i}{\sum_{i=s}^{t} V_i}

Candles without a volume value count with a weight of zero. At the start of each period, both sums start at zero. The first candle of a period gets no value; the line begins with the second. This creates a gap at each restart instead of a connecting line.

Anchor: when the VWAP restarts

The periods start in UTC: the day at 00:00, the week on Monday at 00:00, the month on the first at 00:00, the year on January 1. A candle's open time decides which period it belongs to.

With Automatic (by bar width), the period depends on the chart's candle length, so that a period always covers a few dozen candles:

Candle length	Restart	Examples
up to 15 minutes	daily	1m, 5m, 15m
over 15 minutes, up to 4 hours	weekly	30m, 1H, 4H
over 4 hours, under 1 week	monthly	6H, 12H, 1D, 3D
from 1 week	yearly	1W, 1M

The legend names the period used, such as “VWAP · Week”. With a fixed anchor you can, for example, also see the weekly VWAP on the 15-minute chart.

How to read it

Price above the VWAP: anyone who bought in this period is in profit on average, and buyers have the upper hand. Below it, the reverse applies.
Pullbacks to the VWAP are often used as entries in a trend, and a clear break through the VWAP as a sign that control is changing hands.
Early in the period the line moves a lot; later it becomes sluggish because the volume adds up.

Settings

Setting	Default	Effect
Anchor	Automatic (by bar width)	Period after which the VWAP restarts: Automatic, Day, Week, Month or Year

Good to know

A fixed anchor must be longer than a candle. Day on the daily chart or Week on the weekly chart makes every candle the first of its period, and the line stays empty.
No volume, no VWAP. For series without volume, such as some indices, the line stays empty and is named “VWAP · no volume”.
If the chart's candle series starts in the middle of a period, the first period is only calculated from there.
The typical price is an approximation: an exact VWAP would weight every single trade at its price, while a candle only knows its high, low, close and total volume.
For a VWAP from a candle of your choice and with standard deviation bands, use the Anchored VWAP.