StoxLesson 5 of 12 · Module 3, part 2 of 4 · 4 min read
VWAP: the day's average price
How VWAP is calculated from 5-minute candles, a worked example, what it means when price is above or below it, and how Live Flow uses it twice in the score.
If you could ask every buyer and seller today what they paid on average, the answer would be close to the volume-weighted average price, VWAP. It is the most widely watched intraday reference because it tells you whether today's traders, on average, are sitting on gains or losses.
How it is calculated
Live Flow builds VWAP from today's 5-minute candles, starting at 09:15:
- For each candle, take the typical price: (high + low + close) ÷ 3.
- Multiply it by the candle's volume.
- Add those up for every candle so far, and divide by the total volume so far.
Busy candles count for more than quiet ones. That is the whole point: a price where lots of shares changed hands matters more than a price touched by a few.
| Candle | High | Low | Close | Typical price | Volume | Price × volume |
|---|---|---|---|---|---|---|
| 09:15 | 101 | 99 | 100 | 100 | 1,000 | 1,00,000 |
| 09:20 | 103 | 101 | 102 | 102 | 3,000 | 3,06,000 |
| 09:25 | 102 | 100 | 101 | 101 | 1,000 | 1,01,000 |
| Total | 5,000 | 5,07,000 |
VWAP after three candles = 5,07,000 ÷ 5,000 = ₹101.40, closer to 102 than a plain average (101) because the 09:20 candle traded three times the volume.
Above, below and back to VWAP
- Price above VWAP: the average buyer today is in profit. Buyers have been willing to pay more than the day's average, which is a sign of demand.
- Price below VWAP: the average buyer is losing. Sellers have the upper hand.
- Price returning to VWAP after a move: a decision point. Strong trends often pause at VWAP and continue; weak ones cross it and keep going the other way.
VWAP resets every morning. Yesterday's VWAP has nothing to do with today's.
How Live Flow uses VWAP
VWAP appears in two of the six score measures (lesson 4):
- Distance from VWAP: how far price is above (bullish side) or below (bearish side) VWAP, in percent.
- Time vs VWAP: the share of today's 5-minute candles that closed above the VWAP at that moment. A stock that has spent most of the day above VWAP shows steadier demand than one that has only just crossed it.
VWAP is also one of the candidate prices for Support 1 and Target 1 in each stock's chart (lesson 9).
Strong or stretched?
Being far above VWAP is a sign of strength and a sign of stretch. The further price runs from the day's average, the more room it has to fall back toward it. Two common readings:
| Situation | Common reading |
|---|---|
| Above VWAP most of the day, now a little above it | Steady demand with a nearby reference below |
| Far above VWAP after a sharp burst | Strong, but a pullback toward VWAP is common; chasing here worsens the R:R |
| Was above VWAP all morning, now below it | Momentum fading; the morning's reason may be gone |
VWAP is an average of what already happened. It isn't a level that price "must" respect. Use it to judge where the day's money is, not as a prediction.
Check your understanding
3 quick questions. Your answers aren't graded by anyone: they're here to help it stick.
This lesson is for education only. It is not investment advice or a recommendation to buy or sell any security. StoxGud is not registered with SEBI as an investment adviser or research analyst. Trading futures and options carries a high risk of loss. The course is free; Live Flow, which it describes, is part of StoxGud's paid plan (pricing).