How VWAP works, and how traders use it
VWAP stands for volume-weighted average price. Take every trade today, multiply its price by its share count, add those up, then divide by the total shares traded. The line starts fresh at the open and moves less as the day goes on, because each new trade is a smaller slice of the total.
Example numbers, not a real trade
Why day traders watch it
Funds buying a big block often judge their fills against VWAP. If they paid under it, they did well. That gives the line real weight during the day. A few ways traders read it:
- Above VWAP: buyers have been in control today. Some only take longs above it.
- Below VWAP: sellers have the upper hand. Some only short below it.
- The cross: a stock reclaiming VWAP after a morning selloff is a setup a lot of people trade.
- Distance: a stock stretched far above VWAP often pulls back toward it.
VWAP vs anchored VWAP
Regular VWAP resets every morning. Anchored VWAP starts from a point you pick, like an earnings day or a big low, so you can see the average cost of everyone who bought since then.
Scanning for VWAP moves live
Watching one chart for a cross is easy. Watching the whole market is not. The VWAP scanner uses Streaming Alerts (Scanner) to flag stocks as they happen:
- Crossed Above VWAP and Crossed Below VWAP fire as price crosses the line, with confirmation to cut down noise.
- The Distance From VWAP filter sorts stocks by how far they sit above or below it, so Top Lists (Screeners) can show the most stretched names.
One honest note: VWAP is a reference line, not a signal by itself. It works best with volume and the bigger trend.
Questions
What does VWAP stand for?
Volume-weighted average price: the average price of every share traded today, weighted by how many shares traded at each price.
Does VWAP reset every day?
Regular VWAP resets at the open. Anchored VWAP starts from a point you choose.
Is trading above VWAP bullish?
It shows buyers have been in control today, on average. Many traders favor longs above it, but it is a guide, not a promise.
Can I scan for stocks crossing VWAP?
Yes. The Crossed Above VWAP and Crossed Below VWAP alerts flag them live across the market.