Volume Weighted Average Price (VWAP)
VWAP (Volume Weighted Average Price)
אנליזה טכניתDefinition
The average price of the day, weighted by the volume traded at each price. It resets at the beginning of each session, and day traders use it as a fairness line: a price above it is considered strong, and a price below it is considered weak.
Detailed explanation
Unlike a regular moving average, VWAP gives weight to where money actually traded. Therefore, institutions use it as a performance benchmark, and day traders look for price reactions to it: a retest from above in an uptrend, or rejection from below in a downtrend. In futures, it's important to check where it starts calculating from: the opening of the evening trading day, or the opening of the stock market in New York. Each setting yields a different line.
An example from the prop world
MNQ opens the New York session above the VWAP, drops to it, and finds support there. A trader who goes long on the retest places the drawdown below the VWAP, because a break of it invalidates the idea.