VWAP adds up price × volume for every trade, or for every candle using its typical price, since the start of a session and divides by the total volume. In crypto, sessions usually reset daily at 00:00 UTC, though an anchored VWAP can start from any event, such as a swing low or a news release. Large players use it as a benchmark for the quality of their execution.
Example
Three hourly candles: 1,000 BTC traded at a typical price of $60,000, 3,000 at $60,600 and 1,000 at $60,300. VWAP = (1,000 × 60,000 + 3,000 × 60,600 + 1,000 × 60,300) ÷ 5,000 = $60,420. The middle candle carried most of the volume, so VWAP sits closer to its price than the simple average of $60,300.
Why it matters
VWAP shows who is in control intraday: price holding above VWAP means buyers have paid up on average, while price below means sellers have. Day traders use it as dynamic support or resistance and as a target for mean-reversion trades.
Common mistake
Using a daily VWAP on higher timeframes. A session VWAP resets every day and means little on a weekly chart. For longer views, anchor the VWAP to a significant event instead.
FAQ
- What is anchored VWAP?
- A VWAP that starts from a point you choose, such as a major low, a major high or a news event, instead of from the session open.
- Is VWAP a buy signal?
- No single indicator is. Many traders treat a reclaim of VWAP after a sell-off as a sign of strength, but they confirm it with structure and volume.
- Why does VWAP differ between platforms?
- Different session start times, data sources and the choice between trade data and candle typical prices all change the value.