How markets work
VWAP
Also called Volume-weighted average price
The average price a security traded at over a period, weighted by how much traded at each price.
How it works
VWAP gives more weight to prices where lots of shares changed hands, so it is a better description of "where it actually traded" than a simple average of highs and lows.
Institutions use it as an execution benchmark: filling a large buy order below the day’s VWAP is evidence of decent execution.
Where it misleads people
VWAP is a description of the past, not a fair-value estimate. Using it as a target price to buy at is reading a benchmark as a signal.
Formula
VWAP = Σ (price × volume) ÷ Σ volumeRelated terms
- VolumeThe number of shares or contracts traded in a period — a measure of how much activity there was.
- Market impactThe extent to which your own order moves the price against you as it executes.
- TWAPThe average price over a period, weighting every moment equally regardless of volume.
- SlippageThe difference between the price you expected and the price you actually got.
Mentioned in
More in How markets work
- Adjusted close
- After-hours trading
- Short squeeze
- Short selling
- Auction
- Short interest
- Average daily volume
- Settlement
All 33 How markets work terms · The full glossary, 433 terms
Educational reference only. Nothing here is investment advice or a recommendation to buy or sell anything, and tax treatment depends on your own circumstances and the country you are in.