Markets
Platforms
Accounts
Investors
Partner Programs
Institutions
Contests
loyalty
Trading Tools
Resources
The Volume-Weighted Average Price (VWAP) is a trading benchmark that calculates the average price of a security based on both price and volume throughout a specific time period. VWAP is used by traders to assess whether they are buying or selling at a favorable price compared to the average market price for the day. It helps minimize the market impact of large trades by providing a more balanced view of price action relative to trading volume.
A trader buys shares of a stock at $50 per share, while the VWAP for the day is $48. This suggests the trader overpaid relative to the average price considering the volume of shares traded.
• A benchmark that calculates the average price of a security, weighted by trading volume.
• Used to evaluate whether trades are made at favorable prices compared to the average market price.
• Helps traders minimize market impact when executing large trades.
VWAP helps traders assess whether their trades are executed at a price better or worse than the average market price for the day, relative to trading volume.
It minimizes market impact by providing a balanced view of price movements based on volume, helping traders avoid moving the market with large orders.
It suggests that the trader paid more than the average price for the day, potentially indicating an unfavorable trade.
Start Your Journey
Put your knowledge into action by opening an XS trading account today
Register to our Newsletter to always be updated of our latest news!
