![]() In the same way, retail traders also, use VWAP as an indicator to judge a stock’s prospects. Even large institutional investors or pension plans taking influential positions use the VWAP as a guideline to understand if their buy order is at the right price without causing significant market impact. Besides day traders, mutual fund portfolio managers also use VWAP as a benchmark when buying a large stock block for a particular scheme. Traders closely observe the distance of the price action from VWAP. Hence it is often used as a support and resistance indicator. ![]() VWAP, as shown as the purple line in the price chart above, demonstrates the equilibrium level of a stock’s intraday trading price. The VWAP is depicted on the chart as a moving average, as seen below. Traders often use VWAP to plan their entry and exit. This can be for a single time frame or multiple frames depending on the situation. ![]() More specifically, VWAP computes the average based on how many shares were bought and sold at different prices divided by the total number of shares transacted. VWAP, or the Volume Weighted Average Price, shows the average price of all shares throughout the analysis period. Institutions and traders use VWAP to identify buy and sell areas and to help gauge market sentiment. It provides traders an insight into the price trend where volume is highest. Volume Weighted Average Price (VWAP) is the average trading price of an asset throughout the day using price weighted by volume.
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