Indicator
VWAP (Volume Weighted Average Price)
VWAP is the average price of an instrument over a period, weighted by the volume traded at each price. Because it weights by volume, prices where more trading occurred influence it more than thinly traded prices.
How often the cumulative calculation resets.
Chart runs on a generated sample series, not live or historical exchange data. Values are computed with the same functions CernoQuant uses to run backtests.
How it is calculated
How to read it
- It is an execution benchmark first and a chart line second. Institutional desks are frequently measured on whether they filled better or worse than VWAP.
- Because it accumulates from the session open, it moves less as the session progresses — early bars have less cumulative volume behind them, so early VWAP is noisier.
- Price above VWAP means the current price is above the session’s volume-weighted average. That is arithmetic, not a signal.
What it does not tell you
- It resets each session, so intraday VWAP has no meaning across days. Anchored variants exist but the anchor point is chosen by the observer.
- It is cumulative and therefore increasingly anchored as the session goes on, making it slow to reflect late-session changes.
- It requires reliable volume data. On instruments where reported volume is fragmented or partial, the calculation inherits that unreliability.
Common settings
Session VWAP resetting at the open is the standard. The interactive chart below resets on a fixed bar interval to demonstrate the same behaviour on sample data.
Frequently asked questions
What is VWAP used for?
Primarily as an execution benchmark: it shows the volume-weighted average price over a session, so a desk can assess whether its fills were better or worse than the day’s average.
Does price above VWAP mean buy?
No. It means the current price is above the session’s volume-weighted average, which is a description of where price sits relative to an average. It carries no instruction.
Why does VWAP reset every day?
Because it is designed as a session benchmark. Carrying the accumulation across sessions would make it increasingly insensitive and remove its usefulness for measuring a single day’s execution.
What is anchored VWAP?
The same calculation started from a chosen bar rather than the session open. The anchor is selected by the observer, which makes it subjective in a way session VWAP is not.
Related
- Simple Moving Average (SMA) — Indicator
- Liquidity and the Bid-Ask Spread — Concept
- Volume Profile — Concept
Educational use only
This page is educational material about how a technical tool is calculated and read. It is not investment advice, not a recommendation to buy or sell anything, and not a signal service. No indicator predicts future prices. CernoQuant is a trading journal and analytics platform, not a SEBI-registered investment adviser. Trading decisions and their outcomes are yours alone.
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