VWAP is the average price of a session with each price weighted by the volume traded at it. It is computed by multiplying a typical price by volume for each interval. Those products are added up, and divided by the total volume.
Definition and Formula
A plain average of prices treats a minute with almost no trading just like a minute with a great deal of it. VWAP does not. Each interval enters the average carrying its own volume as weight, so the busiest parts of the session count for most.
The typical price of an interval is normally taken as the average of its high, its low and its close. That single figure stands in for the interval, and it is what gets multiplied by the interval’s volume.
VWAP runs from the start of the session. It starts at the first interval and takes in every interval that follows. So the figure at midday and the figure at the close are two other readings of the same day. Starting it again at a new point produces a new number, which is why the starting point has to be stated.
Because it is anchored to a session, VWAP resets when the session does. A figure carried over from a past session is another reading wearing the same name.
The interval length is a choice, and it changes the answer slightly. Computing the same session on one minute intervals and on one hour intervals gives two figures. They are close but not the same. The typical price of a long interval smooths away detail that a short one keeps. Neither is wrong; they are two readings.
One more result of this running total: early intervals keep their weight for the whole session. As the session goes on, each new interval is a smaller share of the total volume. So the figure moves less and less, no matter how the price behaves.
Formula: Typical price = (High + Low + Close) ÷ 3 · VWAP = Σ (typical price × volume) ÷ Σ volume
A Worked Example
Illustrative figures — not any actual day’s data.
| 09:15–10:15 — H/L/C and volume | 24,230.00 / 24,160.00 / 24,205.00 · 18,00,000.00 |
|---|---|
| 10:15–11:15 — H/L/C and volume | 24,290.00 / 24,200.00 / 24,275.00 · 12,00,000.00 |
| 11:15–12:15 — H/L/C and volume | 24,350.00 / 24,260.00 / 24,310.00 · 9,00,000.00 |
| Total volume | 39,00,000.00 |
|---|---|
| VWAP after three intervals | 24,240.77 |
The three intervals are made up for this page. The VWAP figure is not: it is computed from them by the same function this site’s tests check by hand.
What This Number Tells You
VWAP states the volume weighted average price of the session so far, from the point it was started.
It is compared here with a plain average of the same intervals. This shows how much the busier parts of the session pulled the average towards themselves.
And What It Does Not Tell You
VWAP is a running average of what has already traded. It contains nothing about what will trade next.
A price above or below VWAP compares two numbers; it is not a signal. That gap changes as the session goes on, because VWAP itself keeps moving.
Two VWAP figures can only be compared if they were started at the same point and computed over the same intervals. The starting point has to be stated for the number to mean anything.
Frequently Asked Questions
Why weight by volume at all?
Because a plain average treats a barely traded minute just like a heavily traded one. Weighting by volume makes the busier parts of the session count for more. That is what the word "weighted" in the name refers to.
Which price is used for each interval?
The typical price, taken as the average of the interval’s high, low and close. That single figure stands in for the interval in the weighted average.
Does VWAP change through the session?
Yes, always. It runs from its starting point. So a figure read at midday and one read at the close are two other readings of the same day.
Does VWAP carry over to the next session?
Not in the common sense of VWAP. It is anchored to a session and resets when the session does. A figure carried across sessions is another reading with the same name.
Does the interval length change the answer?
Slightly, yes. A long interval smooths away detail that a short one keeps. So the same session gives close but not the same figures on one minute and one hour intervals.