The formula

For each bar, take a representative price, most often the typical price, which is the high plus the low plus the close divided by three. Multiply it by the bar's volume. Keep running totals of those products and of volume. VWAP after any bar is the first running total divided by the second. It usually resets at the start of each session, so paste bars from one day at a time.

Charting platforms can differ slightly in the price they use per bar and in whether they include extended-hours trading, so a VWAP worked here may not match your chart to the cent. Switch the price method above to see how much the choice moves the result.

Reading the default example

The four sample bars trade between about 20.10 and 20.60 on volume that shrinks and then picks up again. The heaviest bars carry the most weight, so the VWAP sits closer to the prices where most shares changed hands than a simple average of the closes would. The final figure compares the last close with the VWAP: a close below it means the last bar finished under the average price paid across the session so far.

How traders use it

VWAP is a benchmark for execution: a buy filled below the day's VWAP was, on that measure, a better-than-average price. It is also watched as an intraday reference level. It is a lagging average of what already traded, and it becomes harder to move as the day's volume builds. The VWAP page covers the uses and limits, and why a fill differs from the chart explains the gap between the prices you see and the prices you get.