Volume Weighted Average Price (VWAP)

Differences

This shows you the differences between two versions of the page.

Link to this comparison view

Next revision
Previous revision
technical_indicators:vwap_intraday [2019/06/24 19:39]
127.0.0.1 external edit
technical_indicators:vwap_intraday [2022/06/15 23:45] (current)
betseyp [Using with SharpCharts]
Line 15: Line 15:
 Instead of VWAP based on tick data, StockCharts.com offers intraday VWAP based on intraday periods (1, 5, 10, 15, 30 or 60 minute). ​ Note that VWAP is not defined for daily, weekly or monthly periods due to the nature of the calculation (see below). ​ Instead of VWAP based on tick data, StockCharts.com offers intraday VWAP based on intraday periods (1, 5, 10, 15, 30 or 60 minute). ​ Note that VWAP is not defined for daily, weekly or monthly periods due to the nature of the calculation (see below). ​
  
-===== Calculation =====+===== VWAP Calculation =====
  
 There are five steps involved in the VWAP calculation. First, compute the typical price for the intraday period. This is the average of the high, low, and close: {(H+L+C)/​3)}. Second, multiply the typical price by the period'​s volume. Third, create a running total of these values. This is also known as a cumulative total. Fourth, create a running total of volume (cumulative volume). Fifth, divide the running total of price-volume by the running total of volume. ​ There are five steps involved in the VWAP calculation. First, compute the typical price for the intraday period. This is the average of the high, low, and close: {(H+L+C)/​3)}. Second, multiply the typical price by the period'​s volume. Third, create a running total of these values. This is also known as a cumulative total. Fourth, create a running total of volume (cumulative volume). Fifth, divide the running total of price-volume by the running total of volume. ​
Line 45: Line 45:
 ===== Uses for VWAP ===== ===== Uses for VWAP =====
  
-VWAP is used to identify liquidity points. As a volume-weighted price measure, VWAP reflects price levels weighted by volume. This can help institutions with large orders. The idea is not to disrupt the market when entering large buy or sell orders. VWAP helps these institutions determine the [[:​glossary_l#​liquidity|liquid]] and illiquid price points for a specific security over a very short time period. ​+VWAP is used to identify ​[[:​glossary_l#​liquidity|liquidity]] ​points. As a volume-weighted price measure, VWAP reflects price levels weighted by volume. This can help institutions with large orders. The idea is not to disrupt the market when entering large buy or sell orders. VWAP helps these institutions determine the liquid and illiquid price points for a specific security over a very short time period. ​
  
 VWAP can also be used to measure trading efficiency. After buying or selling a security, institutions or individuals can compare their price to VWAP values. A buy order executed below the VWAP value would be considered a good fill because the security was bought at a below average price. Conversely, a sell order executed above the VWAP would be deemed a good fill because it was sold at an above average price. ​ VWAP can also be used to measure trading efficiency. After buying or selling a security, institutions or individuals can compare their price to VWAP values. A buy order executed below the VWAP value would be considered a good fill because the security was bought at a below average price. Conversely, a sell order executed above the VWAP would be deemed a good fill because it was sold at an above average price. ​
 +
 +===== Anchored VWAP =====
 +
 +While traditional VWAP starts at the first bar of the day and ends at the last bar of the day, Anchored VWAP allows the chartist to choose their own starting bar. The overlay is typically started at a significant high or low, earnings announcement,​ or some other indicator of a change in market psychology. This way, VWAP is calculated using only price action since the significant event occurred.
 +
 +{{:​technical_indicators:​anchored_vwap:​avwapexample.png}}
 +
 +Because the starting bar is chosen by the chartist, and the ending bar is the most recent bar available, Anchored VWAP can span multiple days. Since this version of the overlay is not confined to a single trading day, Anchored VWAP can be used on daily charts as well as intraday charts.
 +
 +**Learn More:** [[:​technical_indicators:​anchored_vwap|Anchored VWAP]]
  
 ===== Conclusion ===== ===== Conclusion =====
Line 60: Line 70:
  
 {{:​technical_indicators:​vwap_intraday:​vwapp-8-shch.png|VWAP - SharpCharts}} {{:​technical_indicators:​vwap_intraday:​vwapp-8-shch.png|VWAP - SharpCharts}}
 +
 +For more details on the parameters used to configure VWAP overlays, please see our [[https://​support.stockcharts.com/​doku.php?​id=sharpcharts:​reference#​vwap|SharpCharts Parameter Reference]] in the Support Center. ​
 +