Module 7 · EMA, SMA, RSI, MACD and VWAP · 4 min
VWAP: the day's volume-weighted average price
VWAP tells you today's average traded price so far, giving more weight to prices where more volume traded.
The calculation
Add up (price x volume) for each candle and divide by the total volume. If 9 lakh shares traded at 100 and then 6 lakh at 101, VWAP = (100x9 + 101x6) / 15 = 100.40.
Resets every day
VWAP starts again at 9:15 each day, so it is mainly an intraday tool; across many days it means much less.
How to read it
Price above VWAP means most of today's buyers paid less than the current price; below means they paid more. It is not a signal on its own: on sideways days price crosses VWAP many times.
VWAP on an index
An index like NIFTY has no traded volume of its own, so VWAP on the index itself is not meaningful. Use its future or the stocks instead.
Quiz (3 questions)
1. When does VWAP start counting?
2. 2 lakh shares at 100 and 2 lakh at 110. VWAP?
3. Price is above VWAP. What does it mean?
This is for learning only, not advice on any stock or trade.