The VWAP indicator is often used by day traders to figure out intraday price movement. What does that really mean? By monitoring VWAP, you might get an idea where liquidity is and the price buyers and sellers are agreeing to be fair at a specific time. VWAP is the average price of a stock weighted by volume. What Is Volume-Weighted Average Price (VWAP)? This can be valuable information for short-term traders.
In other words, you get to see price and volume action unfold in real time during a specific time in the trading day. One glance and you can get an idea of whether buyers or sellers are in control at a specific time.Īnother value-added feature of VWAP is it’s calculated from the time the market opens to when it closes. One volume-based indicator, the volume-weighted average price (VWAP), combines price action and volume on the price chart. Some prefer to add subcharts of volume-based indicators such as accumulation/distribution or on-balance volume (OBV). It’s a no-brainer: Volume drives momentum, which is why most chartists keep an eye on volume regardless of what indicator they’re using. But how do you find that momentum? Be prepared to spend time observing price action-know when to pay attention and when to take a break. And traders, especially short-term ones, can potentially benefit from trading stocks with momentum.
Stocks need momentum or liquidity to pump them up and drive them to move. Just as an aircraft needs thrust to pick up speed and take off, so do stocks. Pullbacks and breakouts with respect to VWAP can be useful for identifying potential entry and exit points VWAP can be used to identify price action based on volume at a given period during the trading day Volume-weighted average price (VWAP) can be used to help identify liquidity at specific price points during the trading day