VWAP and Anchored VWAP

What the volume-weighted average price tells you, how day traders use daily VWAP, and how anchored VWAP from a key date shows who is in profit.

The average price, weighted by volume

VWAP stands for volume-weighted average price. It is the average price paid for every share traded over a period, with busier moments counting more. The formula multiplies each price by the volume traded at that price, adds those up, and divides by total volume.

Because it reflects where most of the trading actually happened, VWAP is a fair “average cost” for everyone who traded during the period. Large investors often judge their own execution against it: buying below VWAP counts as a good fill.

Illustration: price moving above and below the session VWAP.

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