Trading with VWAP

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By aaron

VWAP is Volume Weighted Average Price. It is a technical indicator that shows the average price that a security was traded at throughout the day based on the volume for each period and the average price for that period.

It can help determine a fair price for a stock.

The goal is to buy at a price below VWAP and sell at a price above VWAP.

VWAP can also be used to predict intra-day movements because when the price diverges from VWAP it will often converge back toward the VWAP.

VWAP is not the same as a moving average. A moving average will use a set number of periods. For example, a 10-period moving average only uses the last 10 periods. A VWAP is cumulative, using all periods for the whole day, so as the day goes on the VWAP will use more and more periods in its calculation.

#investing #stocks

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