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Volume Weighted Average Price (VWAP)

This indicator is like a moving average, but volume is used to weigh down the average price down or up over a period of one day. And like almost all moving averages, the price of the VWAP lags because it is based on previous data. Althoug there is a lag, the VWAP can still be compared to the current price to see the trend of intraday price movement.

Example

Interpretation

You can use VWAP to see if intraday prices are falling or rising. If prices are below the VWAP, most of the time they will be falling. And in contrast, when prices are above VWAP, then prices are likely rising.

If VWAP stays between the high and the low of the day, then price is consolidating or moving sideways.

Calculation

VWAP = Cumulative(Volume x Typical Price)/Cumulative(Volume)
Upper Band = VWAP + Standard Deviation * multiplier
Lower Band = VWAP - Standard Deviation * multiplier

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