Wednesday, March 05, 2014 5:31:09 AM
VWAP is calculated by multiplying the volume at each price level
by the respective price and dividing by the total volume. The more
volume traded at a certain price level, the more impact that price
has on VWAP.
VWAP= ?(Pn*Vn) / ?(Vn)
where P = price traded;
V = volume traded;
n = number of trades
As an example, consider the following series of trades:
500 shares @ $10.00
300 shares @ $10.05
200 shares @ $10.10
The average price for these three trades is $10.05, however
the VWAP is $10.035 because more volume was executed at
the $10.00 level than at the $10.10 price. One of the keys to
a successful VWAP trade is anticipating market volume and
participating accordingly.
Thank you Stock Ninja!
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