VWAP — Volume Weighted Average Price

Volume

What it measures

VWAP is the average price of a security weighted by volume over a trading session. It represents the average price at which all transactions occurred during the day. It's used primarily by institutional traders as a benchmark — buying below VWAP is considered a good fill; selling above VWAP is also good. For retail traders it acts as a dynamic support/resistance and trend indicator.

How readings are interpreted

Price above VWAP: bullish intraday bias, institutions are paying above average. Price below VWAP: bearish intraday bias. Price crossing VWAP from below: momentum shift to bullish. VWAP acts as strong support in uptrends — price often bounces back to VWAP during pullbacks and then resumes the trend.

Conventional levels

Price above VWAP: bullish intraday bias — prefer longs
Price below VWAP: conventionally read as bearish intraday bias
Price crosses above VWAP on rising volume: conventionally read as intraday strength
First cross of VWAP in the session: most significant; subsequent crosses are less reliable
Distance from VWAP > 1%: stretched; potential mean reversion to VWAP

Where it works, and where it does not

VWAP resets each trading day and is most meaningful for intraday (day trading) and short-term swing trading. It's less useful for crypto and 24/7 markets that don't have defined sessions. Particularly powerful on days with trending price action rather than gaps.

Commonly read alongside

Volume: Price at VWAP + surging volume = trend confirmation
RSI: VWAP support test + RSI not oversold = healthier trend
Moving Averages: VWAP above 20 SMA = bullish session developing

Known limitations

VWAP resets daily — it can't be used across sessions without modification (use anchored VWAP instead)
In news-driven gaps, VWAP is distorted by the opening print
On illiquid stocks or crypto, VWAP is easily manipulated by a single large order

In practice

In momentum approaches, a cross above VWAP on volume is the signal watched, with twice the distance to VWAP a common reference target
In mean-reversion approaches, price 0.5–1% below VWAP and turning up is read as stretched, with VWAP itself as the reference
Anchored VWAP, fixed to a significant low, is generally more useful than session VWAP over longer horizons
As an institutional execution benchmark, large-cap prices tend to respect VWAP closely, making it a widely watched level

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This is reference material, not advice. It describes what each indicator measures and how its readings are conventionally interpreted. Nothing here is a recommendation to buy or sell anything, and no indicator predicts future prices. GU Analyser is an analytical tool — no money is ever traded here.