Volume Weighted Average Price (VWAP)
VWAP is the volume-weighted average price of an instrument since the start of the session, giving a single number that traders and institutions treat as the fair-value benchmark for the day.
What it measures
For every candle since the session open, VWAP multiplies typical price ((high + low + close)/3) by volume, sums those products, and divides by cumulative volume. Because it resets on each session, VWAP represents the true average price paid so far, not a rolling window.
Parameters
| Name | Default | Range | Note |
|---|---|---|---|
| session | daily | daily, weekly, custom | Daily is the institutional default. Weekly VWAP is used on higher timeframes; custom anchors (Anchored VWAP) reset from a specific event. |
| source | hlc3 | hlc3, close, ohlc4 | hlc3 is the classical typical price used in the original VWAP definition. |
How it behaves
Price above VWAP means the average buyer since the open is in profit; below means the average buyer is underwater. Institutional execution desks routinely aim to fill orders "near VWAP", so the line acts as a magnet on high-volume instruments and often serves as intraday support in uptrends and resistance in downtrends.
When it misleads
VWAP is a session average, so it is meaningless on illiquid instruments or outside of a defined session (24/7 crypto without a chosen anchor). On the first few candles after open, VWAP is dominated by the first prints and can be pulled far from where it will settle. And in strongly trending sessions, price can run away from VWAP for hours — treating every touch as a reversion trade against that flow is a fast way to lose.
Backtest result
Sourced backtest in preparation — we're running the rule on our own historical candles before publishing numbers we can stand behind.
FAQ
- Why is VWAP so important to institutions?
- Execution algorithms are often benchmarked against VWAP — a fill "beat VWAP" is a good fill, "worse than VWAP" is a bad one. That benchmark makes the line self-reinforcing: everyone wants to buy below it and sell above it.
- What is Anchored VWAP?
- A VWAP whose accumulation starts from an operator-chosen bar (earnings release, breakout candle, high of the year) rather than from session open. It measures the average price paid since that specific event.
- Does VWAP work on crypto?
- Yes, but you must pick an anchor — 24/7 markets have no natural session. Daily UTC reset, weekly reset, or Anchored VWAP from a swing point are the common choices.
Build a strategy with VWAP
Drop the block into the Nodlow builder and backtest on real historical data.
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