What is VWAP
VWAP stands for volume-weighted average price. It is the average price of a market over a period, where each price counts more if more volume traded at it.
A simple moving average treats every bar equally. VWAP gives heavy-volume bars more weight, so it shows roughly where most trading happened during the session.
In trading, VWAP is mainly an intraday tool. It usually starts fresh at the session open and grows through the day as each new bar is added.
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The formula
For each bar, take the typical price: the average of the bar's high, low and close. Then:
- multiply the typical price by that bar's volume;
- add these products together from the session start to the current bar;
- divide by the total volume over the same bars.
VWAP = cumulative (typical price × volume) ÷ cumulative volume
Because the sums keep growing, VWAP moves quickly early in the session and becomes slower and steadier later.
Default settings and parameters
Most VWAP versions offer these choices:
| Setting | What it does | Practical note |
|---|---|---|
| Anchor / reset period | Session, week, month or a chosen bar | Session reset is the common intraday default |
| Price source | Typical price, close, or other | Typical price is the standard choice |
| Deviation bands | Lines at multiples of standard deviation from VWAP | Shows how far price has stretched from the average |
| Session start time | When the reset happens | Depends on the server time of your platform |
For experienced traders, the session start setting matters most. Forex trades around the clock, so "the session" is a definition you choose, not a fixed event. Different start times produce different VWAP lines on the same chart.
Anchored VWAP
Anchored VWAP starts the calculation from a bar you pick instead of the session open. Common anchors are a major swing high or low, a news release, or a gap.
The line then shows the volume-weighted average price paid by everyone who traded since that event. Traders compare it with levels from support and resistance and volume profile.
How to add VWAP in MT4 and MT5
VWAP is not in the standard indicator list of MetaTrader. You add it as a custom indicator:
- Get a VWAP indicator from the Market or Code Base section inside the terminal, or from a source you trust.
- In MetaTrader, it appears under Navigator → Indicators (custom indicators).
- Drag it onto the chart and set the reset period, session start and bands.
Custom indicators differ in how they handle session start and volume, so test any version on a demo chart first. See MetaTrader 4 and MetaTrader 5 for platform basics.
How to read VWAP: a drawn example
General reading:
- Price above VWAP: during this session, buyers on average have paid less than the current price.
- Price below VWAP: the opposite.
- Price far from VWAP or outside the bands: the move is stretched compared with the session average.
- Price crossing back and forth: no clear session direction.
Many traders use VWAP as a reference level, similar to dynamic support, not as a trigger on its own. These are descriptions of where price sits, not signals to buy or sell.
Where VWAP misleads
- Tick volume in forex. Spot forex has no central exchange, so MetaTrader shows tick volume (number of price changes), not traded amount. VWAP on forex is an approximation. See volume indicator.
- Early session. With few bars, the line jumps around and means little.
- Strong trends. Price can stay on one side of VWAP all day; "return to VWAP" ideas fail here.
- News spikes. A sudden volume burst pulls VWAP toward one price and distorts it for the rest of the session.
- Higher timeframes. A session-reset VWAP on daily charts makes little sense; use anchored or weekly versions and check multiple timeframes.
- Live bar changes. The current value updates as the bar forms, so judge only on closed bars. See repainting indicators.
Leveraged CFD and forex trading can lose money fast, and no indicator removes that risk. Plan position size and stops with risk management.
Frequently asked questions
What is VWAP in trading?
It is the average price of a session weighted by volume, used as a reference for where most trading took place.
Is there a reliable VWAP strategy?
No indicator guarantees results. Traders combine VWAP with structure, levels and risk rules, and test ideas on a demo account.
Does VWAP work on forex?
It can be drawn, but it uses tick volume, so treat it as an estimate rather than true traded volume.
What is the difference between VWAP and a moving average?
A moving average uses a fixed window of bars; VWAP accumulates from an anchor and weights by volume.
Why does my VWAP differ from another chart's?
Different session start times, price sources or volume data give different lines.
More indicator guides are in technical analysis and the trading glossary.