VWAP (Volume-Weighted Average Price)

VWAP is calculated by summing the product of price times volume for every transaction throughout the trading day, then dividing by total volume. The result is the average price at which all shares have traded on a volume-weighted basis — a price that reflects where the most trading activity has occurred, weighted by size.

Why Institutions Use VWAP

Large institutional investors — mutual funds, pension funds, index funds executing rebalances — measure execution quality against VWAP. "Beating VWAP" means buying below VWAP or selling above VWAP, indicating that execution was better than average. This creates a self-fulfilling dynamic: because so many institutional participants are benchmarked against VWAP, they naturally buy on dips below it and sell on moves above it, which reinforces VWAP as a meaningful intraday level.

VWAP as Support/Resistance

Many day traders treat VWAP as an intraday reference level: a price above VWAP is above the session’s volume-weighted average, and a price below it is under that average.

VWAP in the TradeAI News Context

TradeAI News’s Context Journal records your entry relative to VWAP for each trade.