What is the volume weighted average indicator?

Views 50K Sep 14, 2024
What is the volume-weighted average price (VWAP) indicator? -1

Key takeaways

- VWAP, the volume-weighted average price indicator, is used to measure the weighted average price by quantity.

- The VWAP indicator is usually used together with intraday charts.

- If the stock price is running above VWAP, it indicates that the current stock price is in an upward trend.

Conceptual Understanding

The Volume-Weighted Average Price (VWAP) is a technical analysis tool used to measure the weighted average price by quantity.

How to Calculate VWAP

The basic formula for calculating VWAP is as follows:

VWAP = ∑ (typical price * volume) / ∑ volume

where the typical price = (high + low + close) / 3

What is the volume-weighted average price (VWAP) indicator? -2

How to Use VWAP

The VWAP indicator is usually used together with intraday charts to confirm the basic trend of intraday prices.

The volume-weighted average price indicator is similar to a moving average line.

If the stock price is running above VWAP, it indicates that the current stock price is in an upward phase; if the stock price falls below VWAP and runs below it, it indicates that the current stock price is in a downward phase.

Summary.

The VWAP indicator can show the average price of assets considering trade volume over a specific period. However, VWAP is a lagging indicator, which means it does not have predictive power over prices. Therefore, many investors use it as a tool for intraday analysis.

Disclaimer: The above content does not constitute any act of financial product marketing, investment offer, or financial advice. Before making any investment decision, investors should consider the risk factors related to investment products based on their own circumstances and consult professional investment advisors where necessary.

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