7.22What is VWAP?
1What is it?
VWAP (Volume Weighted Average Price) is the average price of the day weighted by volume, the "fair average price" traders paid today.
2Why does it exist?
Intraday traders and institutions use it as a benchmark. Price above VWAP = buyers in control today.
3Calculation
VWAP = Σ(Price × Volume) ÷ Σ(Volume)
- 1,000 shares at ₹100 and 3,000 at ₹104.
- (1,00,000 + 3,12,000) ÷ 4,000 = ₹103.
VWAP = ₹103 (closer to ₹104 because more shares traded there).
4Quick revision
- Volume-weighted average for the day.
- Resets daily.
- Intraday benchmark.
5Knowledge check
Q1. 500 at ₹50, 500 at ₹52. VWAP?Show answer
₹51.
Q2. Does VWAP reset each day?Show answer
Yes.
Q3. Price above VWAP suggests?Show answer
Buyers are in control today.
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