VWAP (Volume-Weighted Average Price) is the average price over a period weighted by volume — so it reflects where most trading actually happened, not just the midpoint. Big players use it as a fair-value benchmark, which makes it act like a magnet and a moving support/resistance.
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Why volume-weighted beats a plain average
A simple moving average treats every candle equally. VWAP weights each by its volume, so the prices where real size traded count more. That makes it a far better read on the "true" average cost of participants over the session.
Why institutions care
Funds are judged on execution versus VWAP — buying below it is "good execution." So they tend to buy under VWAP and sell above it, which is exactly why price gets pulled back toward it. It becomes a self-reinforcing fair-value line.
Anchored VWAP
A normal VWAP resets each session. An anchored VWAP starts from a chosen event — a major high, low, or news candle — and measures the average cost since then. It's powerful for judging whether holders since that event are in profit (bullish) or underwater (bearish).
Quick check — price is stretched far above VWAP. What does that tell you?
Key takeaways
- VWAP = volume-weighted average price = fair-value benchmark.
- Institutions buy below / sell above it, so price reverts toward it.
- Anchored VWAP measures average cost since a chosen event.
FAQ
What is VWAP?
VWAP (Volume-Weighted Average Price) is the average traded price over a period, weighted by volume, so prices with more volume count more. It reflects where most trading actually occurred and is used as a fair-value benchmark and a dynamic support/resistance level.
How is VWAP different from a moving average?
A moving average weights every candle equally; VWAP weights each by its volume. That makes VWAP a better estimate of participants' true average cost, since the prices where large size traded carry more weight.
Why do institutions use VWAP?
Institutional execution is often benchmarked against VWAP — buying below it counts as good execution — so funds tend to buy under VWAP and sell above it. That behaviour pulls price back toward the line, making it act as a magnet.
What is anchored VWAP?
Anchored VWAP starts the calculation from a specific event (such as a major high, low or news candle) rather than resetting each session. It shows the average cost since that event, helping you judge whether holders since then are in profit or underwater.