VWAP
Volume-Weighted Average Price
The institutional benchmark price — the single most-watched intraday level by professional traders.
What is it?
VWAP is the cumulative sum of (price × volume) divided by cumulative volume, calculated from the start of the trading session. It represents the average price at which all transactions have occurred, weighted by volume. Institutional traders use VWAP as a benchmark: buying below VWAP is considered value; selling above VWAP is considered premium. Algorithms are programmed to execute large orders near VWAP to minimise market impact. In crypto, where there is no official session open, VWAP is typically anchored to the UTC midnight open or to a significant price pivot (Anchored VWAP).
When to use it
- Intraday trend direction: price above VWAP is bullish intraday; price below VWAP is bearish. Use as a dynamic support/resistance level.
- Entry timing: in an uptrend, pullbacks to VWAP are potential long entries — institutions often buy at VWAP.
- Anchored VWAP: anchor VWAP to a major swing low or breakout point to identify the average cost basis of buyers since that event.
- VWAP bands: plot ±1 and ±2 standard deviation bands around VWAP (similar to Bollinger Bands but volume-weighted) for overbought/oversold levels.
- Execution benchmark: when entering a large position, compare your average fill price to VWAP — consistently buying below VWAP is a sign of good execution.
Common pitfalls
- VWAP resets at the start of each session (or UTC midnight for crypto). It is meaningless on daily or weekly charts — it is strictly an intraday tool.
- Early in the session, VWAP is heavily influenced by the first few candles. It becomes more stable and meaningful as the session progresses.
- In crypto's 24/7 market, the choice of anchor point for VWAP is subjective. Different anchor points produce different VWAP levels — always specify your anchor.
- VWAP is a lagging indicator on short timeframes — it reflects where price has been, not where it is going.
- Wash trading on crypto exchanges inflates volume, which distorts VWAP. On-chain volume data is more reliable than exchange-reported volume for VWAP calculations.
Free code template
Paste directly into TradingView Pine Editor → Add to chart.
/indicator("VWAP + Bands — DAI Template", overlay=true)
showBands = input.bool(true, "Show SD Bands")
sd1Mult = input.float(1.0, "Band 1 Multiplier", step=0.25)
sd2Mult = input.float(2.0, "Band 2 Multiplier", step=0.25)
vwapVal = ta.vwap(hlc3)
// Standard deviation bands
variance = ta.stdev(hlc3, 20) * ta.stdev(hlc3, 20)
stdDev = math.sqrt(variance)
upper1 = vwapVal + stdDev * sd1Mult
lower1 = vwapVal - stdDev * sd1Mult
upper2 = vwapVal + stdDev * sd2Mult
lower2 = vwapVal - stdDev * sd2Mult
pVwap = plot(vwapVal, "VWAP", color=#6366f1, linewidth=2)
pU1 = plot(showBands ? upper1 : na, "Upper 1", color=color.new(#6366f1, 50), linewidth=1)
pL1 = plot(showBands ? lower1 : na, "Lower 1", color=color.new(#6366f1, 50), linewidth=1)
pU2 = plot(showBands ? upper2 : na, "Upper 2", color=color.new(#ef4444, 60), linewidth=1)
pL2 = plot(showBands ? lower2 : na, "Lower 2", color=color.new(#22c55e, 60), linewidth=1)
fill(pU1, pL1, color.new(#6366f1, 94))
aboveVwap = close > vwapVal
belowVwap = close < vwapVal
bgcolor(aboveVwap ? color.new(#22c55e, 97) : color.new(#ef4444, 97))
alertcondition(ta.crossover(close, vwapVal), "Price Crossed Above VWAP", "Bullish VWAP cross")
alertcondition(ta.crossunder(close, vwapVal), "Price Crossed Below VWAP", "Bearish VWAP cross")