Volume-Weighted Average Price, or VWAP, averages prices according to the volume traded at them over a defined interval. Higher-volume observations have more influence, unlike an equally weighted average of prices.
Calculating a volume-weighted price
At the trade level, multiply each execution price by its quantity, add those values and divide by total quantity. One token traded at $10 and three at $14 produce a VWAP of $13: $52 of traded value divided by four tokens. Fees are excluded in this example.
Chart implementations often use a representative price for each bar, such as the average of its high, low and close, multiplied by bar volume. That approximation can differ from a calculation using every individual trade.
Choosing the interval
VWAP may reset each session or accumulate from another selected anchor. Crypto trades continuously, so the reset time, timezone, venue and data source need checking when comparing values.
Traders use VWAP as a price reference or execution benchmark. Trading above it means being above that weighted historical average, not necessarily that price is currently rising. VWAP lags observed activity and does not guarantee an achievable execution price or a future reversal.