VWAP: volume-weighted average price as a trading tool

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Why the weighted average price is important for market participants

In financial markets, there are many technical indicators for analysis—from momentum oscillators to indicators for identifying reversal points. But one of the most practical and underrated is the indicator that combines two key components: price and trading volume.

VWAP (weighted average price) is an indicator that calculates the average cost of an asset over a selected period, with each trade weighted according to trading volume. Its main advantage is that it does not simply average prices but takes into account the actual pressure from buyers and sellers through volumes.

How the weighted average price is structured

The VWAP calculation is based on a simple logic: first, the typical price of each candle is determined as ( high + low + close, divided by 3), then this price is multiplied by the trading volume for the period.

The formula has the form:

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