VWAP, the institutional benchmark
The volume-weighted average price: what it is, who watches it, and how it behaves.
VWAP, the volume-weighted average price, is the average price of every share traded so far today, weighted by size. It resets each session and answers one question exactly: what has the average participant paid today? Price above VWAP: the average buyer is winning. Below: underwater.
Why it matters: who is anchored to it
VWAP is not folklore, it is the execution benchmark institutions are graded against. A fund working a large buy order all day wants an average fill at or below VWAP, so execution algorithms slow down above it and work harder below it. That mechanical behavior, buyers fading in below the line, patient above, is what gives VWAP its gravitational feel and makes it self-reinforcing: it matters because the biggest participants are paid to care.
Two modes: magnet and rail
| Rotational day | Trend day | |
|---|---|---|
| Price vs VWAP | crosses it repeatedly | holds one side all session |
| VWAP acts as | magnet, reversion target | rail, dynamic support/resistance |
| The play | fade extensions back toward it | use pullbacks to it as continuation entries |
| Rhymes with | positive gamma | negative gamma |