Glossary
VWAP (Volume Weighted Average Price) Explained
VWAP (Volume Weighted Average Price) is the average price of a session weighted by traded volume, reset at the start of each trading day. Intraday traders on NSE/BSE use it as a fair-value reference: price above VWAP is read as buyers in control, below as sellers in control. On TradingLead, add 'VWAP' from the Indicators dialog (or use the Anchored VWAP drawing tool), or use ta.vwap in Pine.
Definition
VWAP (Volume Weighted Average Price) is the average price at which a stock has traded during the current session, where each price is weighted by how much volume traded there. Heavy-volume candles pull VWAP more than light-volume ones. Because it starts fresh every session, VWAP is mainly an intraday indicator.
Formula
For each candle, take a representative price — usually the typical price = (High + Low + Close) ÷ 3. Then, from the start of the session:
VWAP = Σ(Typical price × Volume) ÷ Σ(Volume)
Example (three 5-minute candles):
| Candle | Typical price | Volume | Price × Volume |
|---|---|---|---|
| 1 | 100 | 1,000 | 100,000 |
| 2 | 102 | 3,000 | 306,000 |
| 3 | 101 | 1,000 | 101,000 |
VWAP = 507,000 ÷ 5,000 = 101.4 — closer to 102 because most volume traded there.
How traders read it
- Bias: price above VWAP is often read as buyers in control for the day; below as sellers in control.
- Reversion and support/resistance: in range days, price often returns to VWAP; in trend days, pullbacks may hold near it.
- Execution benchmark: institutions compare their fills with VWAP to judge execution quality.
- Bands: some versions add standard-deviation bands around VWAP to show stretched prices.
Common settings
- Anchor/session: daily session (default for intraday). Anchored VWAP starts from a chosen point such as a results day or swing low.
- Source: typical price (HLC/3).
- Bands: optional, often at 1 and 2 standard deviations.
Pitfalls
- Needs real volume. Instruments or feeds without volume give a meaningless VWAP.
- Late-day stability: by afternoon VWAP moves slowly because so much volume has accumulated.
- Not for daily charts: session VWAP on daily candles adds little information.
- Session definitions: pre-open or extended-hours candles can shift the value depending on how sessions are defined.
How to add VWAP on TradingLead
- Open an intraday chart (for example 5 or 15 minutes) at tradinglead.in/charts.
- Click Indicators, search VWAP and click it. VWAP Auto Anchored is also available; for a custom start point, use the Anchored VWAP drawing tool.
- Adjust source and band settings as needed.
In Indicator Studio, TradingLead's documented Pine v5/v6 subset supports ta.vwap with exchange-local trading-day resets, explicit anchors and optional standard-deviation bands; candles with zero or unavailable volume add no weight. Band weighting is a disclosed local formula, not certified to match TradingView exactly.
//@version=6
indicator("Session VWAP", overlay=true)
plot(ta.vwap(hlc3), "VWAP", color=color.orange)
Educational content only — not investment advice.
Frequently asked questions
- When does VWAP reset?
- Standard VWAP resets at the start of each trading session. In TradingLead's TLScript-Pine, ta.vwap resets on exchange-local trading days, so for NSE/BSE it restarts each Indian trading day.
- Can VWAP be used on daily charts?
- Session VWAP is mainly an intraday tool. On daily or higher timeframes each candle is its own session, so it adds little. For longer periods, traders use an anchored VWAP that starts from a chosen candle — on TradingLead, the Anchored VWAP drawing tool.
- Why doesn't VWAP work on an index chart?
- VWAP needs volume. If the data feed provides no volume for an index, VWAP cannot be weighted meaningfully. Candles with zero or unavailable volume contribute no weight in TradingLead's Pine ta.vwap.
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