Questions » What is VWAP in trading?

What is VWAP in trading?

VWAP stands for Volume Weighted Average Price, and it is a trading indicator that is used to measure the average price at which an asset is traded over a certain period of time, taking into account both the price and the volume of each trade.

In the context of crypto trading, VWAP can be useful for traders who want to understand the overall price trend of a particular cryptocurrency, as well as for identifying potential support and resistance levels. Traders can use VWAP in a variety of ways, such as comparing the current price of a cryptocurrency to its VWAP over a certain time period to determine if it is currently overvalued or undervalued.

VWAP is typically calculated using a formula that takes into account the total traded volume of an asset at each price level, multiplied by the price at which each trade occurred, and then divided by the total traded volume over the entire period. Some trading platforms offer VWAP indicators as part of their charting tools, while others may require traders to manually calculate the VWAP using market data.