Volume-Weighted Average Price (VWAP)

VWAP is the average price of a market over a period, weighted by how much volume traded at each price. It answers a simple question — "what's the average price everyone actually paid today?" — and traders watch it as a reference level.

In 30 Seconds

• VWAP is the volume-weighted average price — the average price traded, weighting each price by the volume that changed hands there.
• It's a reference level, not a signal — it shows where the "average participant" sits, above or below current price.
• VWAP is usually session-anchored — it resets each session, so it answers "average price *today*," not across all history.
• MPM treats VWAP as an objective level — "reclaimed" or "lost" is a disclosed, defined event, not a subjective call.

Definition

VWAP is calculated by taking each price a market traded at over the period, multiplying it by the volume that traded at that price, summing those, and dividing by total volume. In plain terms: it's the average price, but prices with heavy volume pull the average toward them more than thin-volume prices do.

This is what makes VWAP different from a simple moving average. A simple average treats every bar equally; VWAP treats every bar according to *how much actually traded* in it. That's why VWAP is often described as the "true" average price — it reflects where business actually got done, not just where price visited.

VWAP is almost always session-anchored: it starts fresh at the beginning of each trading session and builds through the day. This matters because it means VWAP answers "what's the average price *this session*?" — a rolling, intraday reference — rather than an average over arbitrary history.

"VWAP is where the average participant's cost basis sits — weighted by real volume, anchored to the session."

Why It Matters

VWAP is watched closely — especially by institutional traders — because it's a benchmark for execution quality: a large buyer wants to buy *below* VWAP, a large seller wants to sell *above* it. That institutional attention is part of why VWAP acts as a reference level: a lot of participants are measuring themselves against it.

For reading a market, VWAP offers an objective sense of "fair" for the session: price above it means buyers who participated today are, on average, in profit; below means they're not. Moves back to VWAP, rejections from it, and reclaims of it are all things traders watch — not because VWAP is magic, but because so many eyes are on the same line.

The honest framing: VWAP is a *reference*, not a *rule*. Its usefulness comes from being an objective, widely-watched average — not from any predictive power of its own.

How It Works (a simple example)

Suppose in the first hour a market trades mostly around 100 on light volume, then trades heavily around 102 for the next hour. A simple average of the two hours might land near 101. But VWAP, weighting by volume, will sit closer to 102 — because that's where most of the actual trading happened. VWAP "pulls" toward the high-volume prices.

As the session continues, VWAP updates with every trade, gradually reflecting the day's true center of activity. If price then trades below VWAP, it means the current price is below the session's volume-weighted average — the average participant who traded today is now underwater. Whether that matters is a separate question; VWAP just states the fact.

How MPM Uses VWAP

MPM treats VWAP as an objective, session-anchored level — with defined, disclosed events rather than subjective interpretation:

• "Reclaimed" and "lost" are defined events. Rather than a trader eyeballing whether price "took back" VWAP, HIE uses an objective definition and discloses it. So the event is the same every time, for everyone.
• The anchoring is session-based. VWAP resets at each session open and builds through the session, so it always reflects *this session's* volume-weighted average.

VWAP in HIE is session-anchored — it resets at each session open and builds through the session. A "reclaim" is defined objectively as a fresh close back above VWAP (this bar closes above it, the previous bar closed at or below it); a "loss" is the mirror — a fresh close below. These are close-based crossings, not intrabar touches.

An honest disclosure note: what the "What ran" line actually shows the user is concise — for example:

reclaimed VWAP

The fuller mechanics behind it (the exact session-boundary rule, the typical-price formula, and how trading-hours shifts are handled) are internal and are not stated to the user in the disclosure — so this page explains them for your understanding, but the product itself surfaces the event name, not the full definition.

Interpretation

• Price above VWAP — the average participant this session is, on average, in profit; often read as intraday strength.
• Price below VWAP — the average participant is underwater; often read as intraday weakness.
• Price returning to VWAP — a move back toward the session's volume-weighted "fair" price; watched as a reference test.
• Reclaiming / losing VWAP — price crossing back above or falling below the level; an objective event in MPM, not a subjective call.

As always, these are *descriptions* of where price sits relative to a watched level — not signals. VWAP's value is as an objective, shared reference, not a forecast.

Common Mistakes

"Price below VWAP means sell."

VWAP is a reference, not a signal. Price spends time on both sides of it every session; position relative to VWAP describes context, it doesn't dictate action.

"VWAP works across all history."

Standard VWAP is session-anchored — it resets each session. An all-history VWAP is a different (anchored) construct and answers a different question.

"VWAP is the same as a moving average."

No — VWAP weights by volume, a moving average doesn't. VWAP reflects where trading actually concentrated, which a simple average ignores.

What It Is Not

• Not a signal. Position relative to VWAP is context, not a buy/sell instruction.
• Not an all-time average. Standard VWAP resets each session.
• Not a simple average. It's volume-weighted, which is the whole point.

Limitations

VWAP's meaning depends entirely on its anchor: a session VWAP describes only that session, and comparing across sessions requires care. It's also a *lagging*, cumulative measure — early in a session it's built on little data and can move quickly; late in a session it's heavily anchored and sluggish. VWAP tells you where volume-weighted average price sits, but nothing about why, and nothing about what happens next.

How This Fits Into MPM

VWAP fits MPM's pattern for market-structure levels: take a widely-watched reference, define its events objectively, disclose that definition, and report what history did around the level — rather than treating the level as a signal.