---
title: "VWAP"
type: concept
related: [Vwap, Accounting Price, Price, Financial Markets Intro]
source: https://www.jemoka.com/posts/kbhvwap/
confidence: high
status: active
---

The VWAP is a Financial Market metric that stands for &ldquo;volume-weighted average price.&rdquo; It is given by (sumshares brought(shares bought at price*price its at)/(total shares bought in period)).
&ldquo;the price we care the most about, is the price where the most volume is traded.&rdquo;
Motivation Its a weighted-by volume trading price. Though the closing price is the price used for accounting, it isn&rsquo;t a good metric for large-volume trades.
Trading at the VWAP We Trade at the VWAP because a LARGE trade will move the market around, and we don&rsquo;t want that if we are a large trader. So we trade at the VWAP to ensure that we are getting the best possible value.
Build a volume a profile Slicing the orders to match Control for volume deviations Volume Profile We use the volume-profile: &ldquo;how much/what percentage of today&rsquo;s volume happened in this chunk of the day&rdquo; to predict today&rsquo;s trading by matching by historical data. This often results in looking like a J curve: lots of trading happen at the beginning of the day, very little towards the middle, and LOTS in the end.
Slicing Orders Slice your funds needed to trade, volume-wise, according to the Volume Profile. Set limit orders per slice at the best price for the market.
Control Deviations from Expectation If you were&rsquo;t able to trade by the limit order you posted at that slice, by the end of the slice, cancel your limit order and just send in a market order to ensure your participation with the desired volume at that slice.
