What does VWAP stand for?

VWAP stands for Volume Weighted Average Price. This financial metric is vital for traders and investors as it provides an average price that considers the volume of shares traded at different price levels over a specific time period. VWAP is particularly useful for assessing trading performance because it indicates the average price at which a security has traded throughout the day, relative to both the timing and size of trades.

For traders, VWAP serves as a trading benchmark. It helps to determine whether a stock was purchased at a favorable price and guides them in making further trading decisions. For instance, buying below the VWAP can suggest getting a good price relative to the day's trading activity, while selling above the VWAP might indicate a favorable selling price.

Moreover, VWAP is commonly utilized in algorithmic trading strategies and by institutional investors to minimize market impact when executing large orders, further underscoring its significance within financial markets.