VWAP (Volume Weighted Average Price) is an intraday benchmark that shows the average price of a stock for the day, weighted by traded volume. It tells you the price at which most trading has actually happened during the session.

1. Basic idea

Instead of just taking a simple average of prices, VWAP gives more importance to prices where higher volume was traded.

Formula (conceptually):

VWAP =

\[

\frac{\sum(\text{Price at each trade or candle} \times \text{Volume at that trade or candle})}{\sum(\text{Volume at each trade or candle})}

\]

This calculation starts from market open and runs till close, resetting every new trading day.

---

2. How it works during the trading day

Assume these intraday trades/candles:

| Time | Price (₹) | Volume (shares) | Price × Volume |

|-------|-----------|------------------|----------------|

| 9:15 | 100 | 1,000 | 100,000 |

| 9:20 | 102 | 500 | 51,000 |

| 9:25 | 99 | 1,500 | 148,500 |

- Total Volume = 1,000 + 500 + 1,500 = 3,000

- Total (Price × Volume) = 100,000 + 51,000 + 148,500 = 299,500

VWAP at 9:25 ≈ 299,500 / 3,000 ≈ ₹99.83

As new trades/candles come in, both:

- cumulative volume, and

- cumulative (price × volume)

are updated, and a new VWAP is calculated continuously.

On charts, this appears as a single intraday line that gets smoother as the day progresses.

---

3. How traders typically use VWAP (for understanding, not advice)

1. Execution benchmark

- Institutions and algos track whether their average buy/sell price is better or worse than VWAP.

- Example:

- If buying and your average buy price is below VWAP, execution is considered better than market average for the day.

2. Intraday trend/filter

- Price above VWAP: often read as bullish intraday bias.

- Price below VWAP: often read as bearish intraday bias.

- Some intraday traders avoid taking long positions when price is consistently below VWAP, and vice versa (this is a style, not a rule).

3. Dynamic support/resistance

- VWAP line is sometimes treated like a moving “fair value” line.

- Price pulling back to VWAP and reacting can be watched as potential support/resistance by intraday traders.

---

4. Important characteristics and limitations

- Intraday only:

- Standard VWAP resets daily; it is not meant for multi-day analysis (anchored VWAP is a separate concept).

- Less useful in illiquid stocks:

- In low-volume or operator-driven counters, VWAP can be distorted by a few large trades.

- Lagging indicator:

- Because it’s based on cumulative data from the start of the day, VWAP reacts more slowly in the first part of the session and becomes more stable later.

If you want, I can also explain anchored VWAP, VWAP vs moving averages, or how VWAP is used in intraday strategies (only as educational examples).

If you have any further queries, please connect with us on 022-6290-10141 (Timings : 09.00 AM to 05.00 PM) or you can email us on info@cniinfoxchange.com