# Volume Weighted Average Price (VWAP)

Category: volume

VWAP is the average price weighted by volume over a given period (typically intraday). It represents the fair value benchmark that institutions use to evaluate execution quality.

## Formula

```text
VWAP = Σ(Typical Price × Volume) / Σ(Volume)
where Typical Price = (High + Low + Close) / 3
(typically reset at the start of each trading day)
```

## Common strategies

- Mean reversion: Price reverting toward VWAP from above (sell) or below (buy) — VWAP acts as a magnetic anchor.
- Trend filter: Price above VWAP is bullish intraday; price below VWAP is bearish. Trade in the direction of VWAP.
- Institutional benchmark: Buy when price is below VWAP (good execution); sell when above VWAP.

## How CommonQuant uses it

CommonQuant pre-calculates intraday VWAP on all timeframes. DSL strategies can reference vwap() to build mean-reversion and intraday trend-following logic.

## Frequently asked questions

### Is VWAP only for intraday trading?

Standard VWAP resets daily and is primarily an intraday tool. However, rolling or anchored VWAP (reset at a specific event) can be used on longer timeframes.

### Why is VWAP important?

VWAP is the benchmark institutional traders use to measure execution quality. Trading around VWAP helps align with the "fair value" that large players reference.

Canonical: https://commonquant.ai/learn/indicators/vwap