VWAP
VWAP (volume-weighted average price) is the average price of a session weighted by how much traded at each price. It is the day's average fill price across all participants.
How VWAP is calculated
VWAP = sum of (typical price x volume) / sum of volume, from the start of the session to now, where typical price is (high + low + close) / 3 on each bar. It resets at each new session. On the first bar it equals that bar's typical price.
How it is read
Price above VWAP means buyers since the open have paid less than the current price on average. Institutions often use VWAP as a yardstick for whether an order was filled at a fair price.
Common mistakes
- Using it on daily bars, where it has no session to reset against.
- Reading it as support. It is an average, and price crosses it all day.
- Forgetting it reacts slowly late in the session, because the running total is large.
Test it yourself
What Tickfloor tested
Tickfloor's research desk has backtested 678 strategies, net of modelled trading costs. After correcting for the 761 tests run, 0 passed. That does not prove no strategy works. These are historical diagnostics, not validation under Testing Standard v2: the backtest harness predates that standard and has not been re-run to meet it.
Lessons that cover it
Related concepts
General information only. It doesn't consider your objectives, finances or needs. Tickfloor holds no financial services licence and never places trades.