VWAP, or volume weighted average price, is the average price of an instrument over a trading session, weighted by the volume traded at each price. It is calculated cumulatively from the session open and resets at the next session start, so it reflects where most volume changed hands.
How VWAP is calculated
The formula is VWAP = Σ(typical price × volume) / Σ volume, where the typical price of each bar is (high + low + close) / 3. Both sums run from the session open, so each new bar is added to the running totals rather than replacing an older one.
Four 15-minute bars on EUR/USD:
| Bar | High | Low | Close | Typical price | Volume | TP × V |
|---|---|---|---|---|---|---|
| 1 | 1.0860 | 1.0840 | 1.0850 | 1.0850 | 1,200 | 1,302.00 |
| 2 | 1.0880 | 1.0846 | 1.0872 | 1.0866 | 900 | 977.94 |
| 3 | 1.0886 | 1.0862 | 1.0874 | 1.0874 | 1,500 | 1,631.10 |
| 4 | 1.0876 | 1.0846 | 1.0852 | 1.0858 | 2,400 | 2,605.92 |
After three bars the sums are 3,911.04 and 3,600, so VWAP = 1.08640 and the bar-3 close of 1.0874 sits above the line. Bar 4 carries the largest volume of the session and closes lower: the sums become 6,516.96 and 6,000, VWAP = 1.08616, and the close of 1.0852 is now 9.6 pips below it. The reading crossed from one side to the other inside a single bar, and a long position opened at the bar-3 close would have been marked down by 22 pips at the bar-4 close. The calculation describes volume that has already traded; it states nothing about the next bar.
Why it is not a moving average
A simple moving average weights every bar in its window equally and drops the oldest bar as a new one arrives; that mechanic is covered in the lesson on moving averages. VWAP weights each bar by its volume, so one high-volume bar moves the line further than several quiet ones, and it discards nothing until the session ends.
The reset is the second difference. VWAP has no fixed lookback — its window is the session itself, which is why it is treated as an intraday measure. Carried across several days without a restart, the running sums grow so large that recent trading barely moves the value.
Volume on a retail CFD account
CFDs are traded over the counter, not on a central exchange, so no consolidated volume figure exists for them. What a retail platform labels volume is tick volume: the number of price changes recorded inside the bar by that broker's feed, not the number of units transacted. Tick volume tracks activity, but it is not exchange volume and it differs between providers.
Any VWAP plotted on a CFD chart is therefore an approximation, and two platforms can display different values for the same instrument over the same session. Check which volume type your platform uses before comparing readings.
To convert the distance between price and VWAP into a cash amount in your account currency, use the pip calculator.
