VWAP

Volume Weighted Average Price (VWAP) is an execution strategy usually used in intraday trading. VWAP is the average of all trades weighted by their volumes. It gives an indication of how the price has moved over a period of time, along with the trade executions.

VWAP is calculated by first multiplying the volume traded in a given time interval at each price level with its respective price. Then dividing the sum of all these products by the total volume traded during that time period.

VWAP = Σ (Number of shares traded * share price) /  Total shares traded

One of the important uses of the VWAP is that it gives a fair idea of the price where a trader can expect volume support. This is very useful during the execution of a strategy in which a large order needs to be executed by splitting it into smaller orders to reduce the market impact. It is also used as a benchmark to decide whether a security should be bought or sold at a particular price. For example, a buy order executed below the VWAP would be considered a good buy, and conversely a sell order executed above the VWAP would be considered a good sell.