what is VWAP (Volume-weighted average price)?
VWAP is a ratio of the cumulative share price to the cumulative volume traded over a given time period. (typically intra day)
VWAP Formula?
add the high, low, and close, then divide by three. Multiply this by the volume for that period
VWAP = Cumulative Typical Price x Volume/Cumulative Volume
Where Typical Price = High price + Low price + Closing Price/3
Cumulative = Total since the trading session opened
How VWAP Indicator works?
stocks with prices below VWAP as undervalued/low / Support/ buy. and those with prices above it as overvalued high / resistance for sell
vwap trading intraday strategy
Buy below VWAP Support and sell above VWAP Line. may traders tweak the settings and combine with other indicators. its lagging indicator, recommended to confirm with price action.
VWAP VS EMA
VWAP is calculated by multiplying the typical price by volume and then dividing by total volume.
A Exponential moving average incorporates only price but not volume.
Limitations of VWAP
VWAP is a intraday indicator and restarts at the opening of each new trading day. more than one day it creates inaccurate indicator.
