What is VWAP?
VWAP combines price and traded volume to estimate the average price at which a market has traded during a defined period. Standard session VWAP normally resets at the beginning of each trading session.
What does it measure?
The average traded price weighted by volume. Prices where more contracts traded have more influence than prices where little volume traded.
How is it calculated?
VWAP = cumulative(price x volume) / cumulative volume. Platforms can use typical price or another price input, so exact values can differ slightly.
Common interpretation.
- Price above VWAP means the current market is trading above the session's volume-weighted average.
- Price below VWAP means the market is trading below that average.
- Repeated interaction with VWAP can indicate that the market is accepting prices near the session average.
- Distance from VWAP alone does not determine whether price must reverse.
How traders use it for market context.
- VWAP is particularly common in index-futures analysis such as NQ, MNQ, ES and MES.
- It can be combined with market structure, liquidity levels and session context rather than treated as a standalone signal.