What is VWAP in crypto?

VWAP, short for volume weighted average price, is the average price a coin has traded at over a session, giving more weight to prices where more of it changed hands. It is drawn as a single line on a price chart. Traders read it as a measure of where most buying and selling has taken place so far.

How is VWAP calculated?

TradingView describes the standard method in five steps:

1. For each candle, find the typical price, which is the high plus the low plus the close, divided by three.
2. Multiply the typical price by that candle's volume.
3. Keep a running total of those results.
4. Keep a running total of volume.
5. Divide the first total by the second.

The sums start at an anchor point and keep growing until the next reset. The TA-Lib reference points out a side effect. As the session goes on, each new candle is a smaller share of the total, so the line responds less and less to fresh moves.

What is VWAP in crypto trading?

In stock markets, VWAP normally resets at each day's open. Crypto trades around the clock, so there is no natural open. altFINS notes that most crypto charts start the day at 00:00 UTC, so a session VWAP resets at midnight UTC. A platform set to a different time zone will show a different line for the same coin.

Platforms also offer longer anchors. TradingView can reset VWAP weekly, monthly, quarterly or yearly. An anchored VWAP starts from a point the user picks, such as a swing high or a big news event, and shows the average price paid by everyone who traded since then.

What is VWAP used for?

The line began as an execution benchmark. TA-Lib notes that trading desks often measure their fills against it, and altFINS explains that a large buyer who pays less than VWAP is seen as having traded well.

Chart traders use it differently. TradingView says price above VWAP is read as a sign of an upward trend, price below as a downward one, and price crossing back and forth as a sideways market. Many use it alongside other indicators rather than alone.

What is the difference between VWAP and a moving average?

Both are averages of past prices and both lag. A simple moving average, explained in the 200-week moving average guide, uses a fixed window of recent closes and treats each one equally. VWAP weights each price by volume and accumulates from its anchor rather than dropping old data. TradingView describes VWAP as built for intraday charts, while moving averages are used on every timeframe.

VWAP has weak spots. altFINS notes that it is unstable early in a session when little has traded, and that a few large trades can distort it on thinly traded altcoins. Volume from one exchange may also miss much of a coin's activity, a problem covered in what trading volume is. Like any indicator, it describes what has already happened.