VWAP indicator

Written by K T

On July 26, 2020
VWAP indicator

VWAP indicator – is volume-weighted, the average price it’s used for intraday trading.

Also is known as day-trading. So in case you’re curious here’s the formula for today’s VWAP price for a particular stock:
it is the running total of the value of each transaction for the trading days so far. In other words: the sum of the number of shares bought times, the share price for all today’s transactions divided by the total number of shares bought today.
I tried to put that in plain English as, much as possible and you don’t need to know the formula to, be able to use it but it helps… Or at least it won’t hurt you to know, the formula what it is.
Today the trading day all, of the transactions every tick every price movement in a stock means that there was a buyer somebody bought some stock. And also somebody was on the other, end of that transaction somebody sold it.
They bought a certain number of, shares at a certain price. So if you take the number of shares times the, price that somebody bought at that. Then that’s the total value of that, transaction.
If you add all those up the value of all the transactions today, that would be in the numerator of this fraction. Then in the denominator would be the total volume for the day. The total number of shares traded today.
that’s the best way I can explain it but, again you don’t need to know
VWAP is the average price of the stock today so far weighted against the, trading volume of that stock today. Thus giving more weight or, importance to periods of high volume. As opposed to let’s say a simple,moving average which doesn’t take volume into account. So much that’s more, an average of all the prices VWAP like a moving average in that, it it does factor in the price.
In, terms of trading volume it can give more importance to periods of high or, heavy volume. Much like a moving average. Day traders can put the view app on 1-minute candlestick charts. Use it as a momentum indicator.
An upward sloping WVAP line shows that the stock price is, trending upward. A downward sloping line shows that the stock price is, trending downward. It makes sense if the stock if the line is going slanting upward.
Then the stock price is also generally trending upwards at, least in the short term. If the VWAP line is trending downwards then so, so is the stock price. At least in the short term.

VWAP Line

The VWAP line can also provide support or resistance. One of the most common uses of the VWAP line is as a possible buy or sell signal.
When a candlestick breaks above the VWAP line and sells or even short sell when a candlestick and breaks, below the VWAP line.
Again this is not trading advice this is not telling, you what to do or what not to do. I don’t think you want to use just one, an indicator to base your trading or investing decisions on. Some people will use this as a buy or sell signal. Notice, I say clearly it has, to have a clear break above or below.

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