VWAP stands for volume-weighted average price. Unlike a simple moving average, it weights each price by the volume traded there, so it reflects the average price the market actually paid — the level at which most business was done during the session.
That makes VWAP a widely watched fair-value benchmark. Institutions use it to judge whether their fills were good, which means the line attracts real attention and can influence how price behaves around it.
Reading VWAP
The simplest read is directional. Price trading above VWAP means buyers are paying more than the session average — a bullish lean; price below VWAP is the opposite. The slope of the line adds context: a rising VWAP supports longs, a falling one supports shorts.
Entry and stop logic
A common intraday approach is the VWAP pullback: in an uptrend that holds above VWAP, wait for price to dip back to the line, look for buyers returning, and enter with a stop just below VWAP. If price closes decisively on the other side, the fair-value read has flipped and the trade is invalid.
- VWAP weights price by volume — the session's true average.
- Above VWAP leans bullish; below leans bearish.
- Pullbacks to VWAP in a trend can offer defined-risk entries.
- Stop goes just beyond VWAP; a decisive cross invalidates the idea.
VWAP resets each session, so it is mainly an intraday tool. It works best in trending or orderly conditions and can whipsaw in choppy markets, so pair it with structure and never treat a touch of the line as a guaranteed turn.
VWAP is the volume-weighted fair price of the session — a benchmark for bias and pullback entries, best used with structure and honest stops.