Volume-weighted average price

VWAP is calculated using the following formula:

${\displaystyle P_{\mathrm {VWAP} }={\frac {\sum _{j}{P_{j}\cdot Q_{j}}}{\sum _{j}{Q_{j}}}}\,}$

where:

${\displaystyle P_{\mathrm {VWAP} }}$ is Volume Weighted Average Price;

${\displaystyle P_{j}}$ is price of trade ${\displaystyle j}$;

${\displaystyle Q_{j}}$ is quantity of trade ${\displaystyle j}$;

${\displaystyle j}$ is each individual trade that takes place over the defined period of time, excluding cross trades and basket cross trades.[4]

The VWAP can be used similar to moving averages, where prices above the VWAP reflect a bullish sentiment and prices below the VWAP reflect a bearish sentiment. Traders may initiate short positions as a stock price moves below VWAP for a given time period or initiate long positions as the price moves above VWAP.[5]

Institutional buyers and algorithms often use VWAP to plan entries and initiate larger positions without disturbing the stock price.[4]

VWAP slippage is the performance of a broker, and many Buy-side firms now use a Mifid wheel to direct their flow to the best broker.

• Electronic trading
• Time-weighted average price