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PipsGrowth

Key Takeaways

Difficulty:Beginner
Reliability:High
Category:volume
Timeframes:1M, 5M, 15M

Volume Weighted Average Price (VWAP)

volumešŸ“Š 1M, 5M, 15M, 1H

Average price weighted by volume, commonly used as a benchmark for institutional trading.

Formula

Code
VWAP = Ī£(Price Ɨ Volume) / Ī£(Volume)
Calculated from the start of the trading session

Detailed Explanation

VWAP (Volume Weighted Average Price) is the average price weighted by volume, calculated from the start of the trading session.

**Importance:** - Benchmark for institutional execution - Fair value reference for day traders - Dynamic support/resistance

**VWAP Bands:** Standard deviation bands around VWAP provide additional trading levels.

Parameters

Anchor
Default: Session
When VWAP resets

šŸ“ˆ Bullish Signals

Price crosses above VWAP with volume

šŸ“‰ Bearish Signals

Price crosses below VWAP with volume

Python Implementation

VWAP calculation

Python
import pandas_ta as ta
df['VWAP'] = ta.vwap(df['high'], df['low'], df['close'], df['volume'])

TradingView Pine Script

Try on TradingView
JavaScript
//@version=5
indicator("VWAP", overlay=true)
vwap = ta.vwap(hlc3)
plot(vwap, "VWAP", color=color.blue)
šŸ“Š Use TradingView for Advanced Charting
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MT5 MQL5 Code

C++
// Custom VWAP implementation needed
// Sum(Price * Volume) / Sum(Volume) from session start

Python Libraries

pandas-ta
Technical analysis
pip install pandas-ta

Common Mistakes

āœ—Using on higher timeframes (designed for intraday)
āœ—Forgetting VWAP resets daily

Confirmation Signals

Volume spike
Price action
Support/resistance

Best For

Intraday tradingInstitutional benchmarkExecution quality

šŸ’” Pro Tips

  • ā€¢Resets at market open
  • ā€¢Institutions use VWAP for execution benchmarks
  • ā€¢VWAP bands can act as support/resistance
Last updated: December 29, 2024

Educational Disclaimer

This content is for educational purposes only and does not constitute financial or investment advice. Trading involves significant risk and you may lose your capital. Always consult a licensed financial advisor before making investment decisions.

Learn More

Investopedia - Technical IndicatorsBabyPips - Technical IndicatorsMetaTrader 5 Docs

Frequently Asked Questions

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On-Balance Volume (OBV)

Cumulative indicator that adds volume on up days and subtracts on down days. Shows buying/selling pressure.

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Volume-weighted RSI that measures buying and selling pressure using price and volume.

Volume Profile

Shows volume traded at each price level, identifying key support/resistance zones.

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