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Market Intelligence › Basic Terminologies
What volume weighted average price means and its institutional use
Published by The Retail Trader · JUL 26, 2026 · Indicators
VWAP is an average, but not a simple average — each trade is weighted by its volume. That is why it tells you at what price most of the business was actually done today.
Desks that fill large orders need to find out whether their execution was better or worse than the market that day. VWAP is that benchmark.
For this very reason VWAP becomes a self-reinforcing level — many participants try to execute around it.
These points are part of VWAP's design:
• It resets every day — it is an intraday tool, not a positional one.
• At the start of the day it swings a lot because there is little data.
• In an illiquid stock it is much less meaningful.
• Anchored VWAP is a different variant that starts from a chosen point.
Being above or below VWAP is not a certificate of bullish or bearish. Its most practical use is in execution — if you are filling a large order, getting a fill better than VWAP is itself a measurable goal.
This article is educational only — it is not a buy or sell recommendation, it makes no claim of guaranteed returns, and it is not advice. Rules, rates and mechanics are changed from time to time by the exchanges, SEBI and RBI, so verify every number yourself with your broker or an official source.