GLOSSARY // Day Trading
VWAP
VWAP — volume-weighted average price — is the session's average trade price with every print weighted by its share size: cumulative (price x volume) divided by cumulative volume, reset each day at the open. A stock at $20.60 with a $20.25 VWAP is trading above the average dollar paid so far today.
It functions as the day's institutional benchmark. Execution algorithms are graded against it, so real order flow clusters around the line, which is what makes it behave like dynamic support and resistance. Above VWAP the average buyer of the day is profitable and dips get bought; below it the average buyer is trapped and rallies get sold.
VWAP is an intraday tool. Multi-day or anchored variants exist, but the standard line means nothing carried across sessions.
A stock gaps up and trades between $14 and $15 all morning with VWAP at $14.40. A trader waits for the third pullback to $14.42, enters long with a stop at $14.24 below the line, and exits at $14.95 — risking 18 cents to make 53, with the entry premised on algos defending the average price.
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Educational only — not financial advice. Definitions simplified for clarity; markets are messier than definitions.