VWAP

VWAP (volume-weighted average price) is the average price at which an instrument has traded so far in the session, weighted by the volume at each price — the day’s true average cost of participation. Unlike a moving average, which weights every bar equally, VWAP counts a 10-lakh-share trade ten times as heavily as a 1-lakh-share trade. It resets every session and is meaningful only intraday.

Formula

VWAP = Σ (price × volume) ÷ Σ volume

computed cumulatively from the open, typically using each bar’s typical price (high + low + close) ÷ 3. Example: three bars of RELIANCE trade at typical prices ₹1,400, ₹1,404 and ₹1,398 with volumes 2 lakh, 1 lakh and 3 lakh shares. VWAP = (1,400×2 + 1,404×1 + 1,398×3) ÷ 6 lakh = (2,800 + 1,404 + 4,194) ÷ 6 = ₹1,399.67. Price trading above a rising VWAP is read as buyers in control; repeated rejections at VWAP from below mark it as intraday resistance. Hypothetical figures.

Why it matters

VWAP earns its place in algo trading twice over. As a signal, it is a clean, parameter-free filter — “only take longs above VWAP” is a common regime rule in intraday systems, including ORB variants. As a benchmark, it is how execution quality is judged: institutions measure fills against VWAP, and a retail algo that consistently buys far above it is paying an execution tax. Both uses are testable claims, not folklore.

In INDfolio AI, VWAP-based conditions can be used in strategy rules and backtested on NSE intraday data — see Intraday.