What is VWAP?
VWAP (volume-weighted average price) is the average price of an asset over a period, with each price weighted by the volume traded at it.
How it works
It is the running total of typical price (high plus low plus close, divided by three) multiplied by volume, divided by the running total of volume. Intraday traders usually reset it each session. Price above VWAP is read as buyers in control and price below as sellers in control, and institutions use it as a benchmark for execution quality.
What it can't tell you
A session VWAP is a running average of what has already happened, so it describes the day so far rather than predicting the rest of it.
How Tickfloor uses it
Tickfloor's agreement score uses a rolling 20-period VWAP as one of its ten inputs.
Does it work as a strategy?
Tickfloor backtested 1 rule that use VWAP, net of modelled trading costs, against a benchmark of the same assets. None finished ahead of the benchmark on the point estimate, and none cleared the corrected bar (Benjamini-Hochberg q below 0.10). These are specific tested implementations, not every way to use VWAP, and a historical diagnostic, not validation under Testing Standard v2.
Tickfloor's research desk has backtested 517 strategies, most against an equal-weight benchmark of the same assets rebalanced daily that pays no costs (the strategies pay theirs). After correcting for the 598 tests run (Benjamini-Hochberg), 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.
General information only. It doesn't consider your objectives, finances or needs. Tickfloor holds no financial services licence and never places trades.
Common questions
What is VWAP?
VWAP (volume-weighted average price) is the average price of an asset over a period, with each price weighted by the volume traded at it.
How does VWAP work?
It is the running total of typical price (high plus low plus close, divided by three) multiplied by volume, divided by the running total of volume. Intraday traders usually reset it each session. Price above VWAP is read as buyers in control and price below as sellers in control, and institutions use it as a benchmark for execution quality.
Does VWAP work as a strategy?
Tickfloor backtested 1 rule that use VWAP, net of modelled trading costs, against a benchmark of the same assets. None finished ahead of the benchmark on the point estimate, and none cleared the corrected bar (Benjamini-Hochberg q below 0.10). These are specific tested implementations, not every way to use VWAP, and a historical diagnostic, not validation under Testing Standard v2.
What are the limits of VWAP?
A session VWAP is a running average of what has already happened, so it describes the day so far rather than predicting the rest of it.
How does Tickfloor use VWAP?
Tickfloor's agreement score uses a rolling 20-period VWAP as one of its ten inputs.