> For the complete documentation index, see [llms.txt](https://algotrade-1.gitbook.io/docs/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://algotrade-1.gitbook.io/docs/indicators-library-and-guide/vwap-volume-weighted-average-price.md).

# VWAP (Volume-Weighted Average Price)

### What is VWAP?

VWAP stands for **Volume-Weighted Average Price**. It calculates the average price of an asset over a specific period, **weighted by the amount of volume traded** at each price level.

Unlike simple moving averages, VWAP takes both price and volume into account, giving a more accurate picture of where **fair value** lies during a trading session.

***

### Why use VWAP in your strategy?

VWAP is widely used by institutional traders, scalpers, and intraday strategies because it helps determine:

* **Market sentiment:** Are we trading above or below the average price?
* **Support and resistance:** VWAP often acts as a magnet or rejection zone.
* **Entry zones:** An pullback to VWAP in an uptrend may provide a high-probability buy.

It’s especially useful for **short-term intraday trading**, where understanding value areas and volume trends is crucial.

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### VWAP Settings in the AlgoBuilder

\
When adding VWAP to your strategy inside the **AlgoBuilder**, you’ll be able to customize or use the following parameters:

| Setting             | Description                                                                 |
| ------------------- | --------------------------------------------------------------------------- |
| **Session Reset**   | Whether VWAP resets daily or runs continuously (Daily is default).          |
| **Source**          | Price data used in the calculation (e.g., close, hlc3, ohlc4).              |
| **Offset**          | Visually shift the VWAP forward or backward on the chart for styling.       |
| **Band Multiplier** | If VWAP bands are used, this defines their standard deviation. *(Optional)* |

> In most cases, default settings work well, but advanced users can fine-tune source and offset to better match with other indicators.

***

### Example Usage

#### Long Entry Examples:

* **Pullback to VWAP:**\
  Price pulls back to VWAP in an uptrend and holds = a potential long entry.\
  → Indicates support and fair-value re-entry zone.
* **VWAP Breakout:**\
  Price breaks above VWAP with increasing volume = long on breakout confirmation.\
  → Suggests a shift in market control from sellers to buyers.

#### Short Entry Examples:

* **Failure at VWAP:**\
  Price retests VWAP from below but fails to break through = a potential short entry.\
  → Acts as a resistance level in a downtrend.
* **Break Below VWAP:**\
  Price breaks and closes below VWAP on strong volume — short position confirmed.\
  → Suggests bearish control of the session.

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#### 🎯 Take Profit / Exit Examples:

**Long Position:**

* **Exit near upper deviation band (if enabled):**\
  Suggests price is extended from average value.
* **Exit if price closes back below VWAP:**\
  May signal trend weakening or reversal.

**Short Position:**

* **Exit near lower deviation band (if enabled):**\
  Signifies potential oversold conditions.
* **Exit if price breaks and holds above VWAP:**\
  Implies buyers are regaining control.

***

###  Tips for Using VWAP in the AlgoBuilder

* Combine with momentum indicators (e.g., RSI, MACD) for stronger confirmation.
* VWAP works best on **lower timeframes** (5m–1h) for intraday strategies.
* Use VWAP as a **trend filter** only go long above VWAP and short below.
* Incorporate VWAP in **exit logic** to secure profits around key value zones.