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VWAP Meaning

Volume Weighted Average Price (VWAP) is a trading benchmark that reflects the average price of an asset weighted by volume over a specified time period. To calculate VWAP, the total value traded (price times volume for each transaction) is divided by the total volume traded.

Traders compare the current price of an asset to its VWAP to determine whether the market is trending above or below its average value. Institutional traders often use VWAP to assess their execution quality: buying below and selling above the VWAP is seen as favourable.

VWAP also serves as a dynamic support or resistance level, helping traders identify entry and exit points.

Because it resets each day, VWAP is most useful for intraday strategies rather than long-term analysis.

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