VWAP & Moving VWAP
VWAP is an acronym for Volume-Weighted Average Price, the ratio of the value traded to total volume traded over a particular time horizon (usually one day). It is a measure of the average price a stock traded at over the trading horizon.
VWAP is often used as a trading benchmark by investors who aim to be as passive as possible in their execution. Many pension funds, and some mutual funds, fall into this category. The aim of using a VWAP trading target is to ensure that the trader executing the order does so in-line with volume on the market. It is sometimes argued that such execution reduces transaction costs by minimizing market impact (the adverse effect of a trader's activities on the price of a security).
VWAP starts its calculation over each market day so it is only visible on intraday time frames. Moving VWAP is an x-period volume-weighted moving average. On this 15-minute chart of AAPL, you can see the spikes in VWAP (yellow) where it starts over each day whereas the Moving VWAP is a running 50-bar volume-weighted average.
Note: Click here for more on how to use VWAP on TC2000
SUM(Vz * (Oz + Hz + Lz + Cz), x) / 4 / SUM(Vz, x)
|
x=Period, z=Offset |
Where x is the period which must be an integer.
Where z is the offset. An offset of 1 returns the value for the previous bar instead of the current bar.
Examples
The 100 period moving VWAP for the current bar can be written as follows.
SUM(V0 * (O0 + H0 + L0 + C0), 100) / 4 / SUM(V0, 100)
But you can leave off the offset parameters because it is for the current bar.
SUM(V * (O + H + L + C), 100) / 4 / SUM(V, 100)
You would need to add the offset parameters back in if you were interested in the value for the previous bar instead of the current bar.
SUM(V1 * (O1 + H1 + L1 + C1), 100) / 4 / SUM(V1, 100)
There is a drawing tool called Anchored VWAP by Alphatrends that allows you to plot the actual VWAP over any period of time selected. It is the only way to see the unaveraged VWAP value on a daily chart or above. Select the Anchor icon in the drawing tools to plot Anchored VWAP.
Read more on VWAP/Moving VWAP at Investopedia.