VWAP: Volume-Weighted Average Price Guide
VWAP is the institutional benchmark for execution quality. Learn how CFD traders use VWAP for intraday entries and exits. The institutional benchmark — VWAP.
What Is VWAP?
Volume-Weighted Average Price (VWAP) calculates the average price weighted by volume throughout the trading day. It's the benchmark that institutions use to measure execution quality — if they buy below VWAP, they got a good fill.
Reading VWAP
- Price above VWAP: Bullish — buyers are willing to pay above average
- Price below VWAP: Bearish — sellers are willing to sell below average
- Price oscillating around VWAP: Ranging — no clear direction
Trading with VWAP
VWAP is primarily an intraday indicator — it resets each session. Common strategies: (1) Buy when price crosses above VWAP with increasing volume. (2) Sell when price crosses below VWAP. (3) Use VWAP as a dynamic support/resistance level — price often bounces off VWAP in trending sessions.
VWAP Bands
Standard deviation bands around VWAP create upper and lower channels. Price touching the upper band is overbought; touching the lower band is oversold. These bands work well for mean reversion strategies in ranging markets.
Related Articles
Disclaimer: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 70-80% of retail investor accounts lose money when trading CFDs. Backtesting does not guarantee future results. Always consider whether you can afford the potential loss of your capital.