Volume-Weighted Average Price (VWAP) is yet another technical indicator that is popularly used in Intrday trading. Much like many other Trad-Fi indicators, this also can be used in Crypto to give you a trading advantage. In this blog we will try to understand how the VWAP indicator works and how you can apply it in your trading strategy.
VWAP (Volume Weighted Average Price) is a trading indicator that represents the average price of an asset throughout the day, weighted by trading volume.
Unlike a simple moving average, which treats each bar equally, VWAP assigns more influence to periods with heavier activity.
The result is a reference line many traders consider the session’s fair value. When price is persistently above VWAP, the market is paying a premium to the session’s average; when price sits below, the market is accepting a discount.
The math is straightforward. For each bar, compute the Typical Price = (High + Low + Close) ÷ 3. Multiply that by the bar’s Volume to get Dollar Volume. Sum Typical Price × Volume across bars and divide by cumulative Volume to date. That quotient is VWAP for the latest bar.
By convention, VWAP is usually computed using the typical price, which is the average of HLC for a candle:
This typical price is then multiplied by volume for that candle, and added into the VWAP formula.
So in crypto, for intraday VWAP:
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By default when you choose the VWAP indicator, the Source is set to HLC3 and Anchor period set to session.
Because crypto lacks a universal open or close, the concept of a “day” depends on your chart’s session settings. Most traders keep 00:00 UTC for consistency, while some align their charts with regional trading hours to study Asia, London, and New York flows.
Differences in session clocks can produce slightly different VWAP lines even on the same symbol, which is why alignment of exchange, timezone, and session settings is essential when comparing notes with others.
Advanced users overlay multiple session VWAPs to monitor how intraday leadership changes as regions hand off.
Others keep weekly or monthly anchored VWAPs to see where longer-horizon participants are positioned relative to major events.
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VWAP can be used as a fair value benchmark in Crypto.
It can tell you whether the current market price is trading above or below the true average price of the day, adjusted for volume.
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Session VWAP restarts at the beginning of each session and is the default on most platforms. It is ideal for daily context and execution benchmarking because it reflects where the majority of that session’s trading occurred.
Rolling VWAP applies the same formula over a sliding window of bars, so it never hard-resets and can be used on higher time frames. Anchored VWAP (AVWAP) starts from a user-selected bar, such as a major high or low, listing event, or macro news candle, and then cumulates forward.
Choosing between them is a function of your objective. Session VWAP helps you judge who controls the current day. Rolling VWAP provides a continuous volume-weighted mean across longer horizons. Anchored VWAP lets you test whether participants from a known event are in profit or under pressure. For AVWAP, use clean anchors and let price behavior at the line guide decisions rather than assumptions.
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Identify higher highs and higher lows and a rising VWAP. Enter on a decisive close back above VWAP after a shallow undercut. Place the stop below the most recent swing low. Take partial profits at the prior high, then trail under higher lows or a +1 standard deviation band.
When price consolidates around VWAP, wait for a strong close above it, then a controlled retest. Enter on confirmation that the retest holds. Place the stop below the retest low. Target the range high first and keep a runner for trend extension.
Anchor to a major low, high, or news bar. When price revisits that AVWAP, trade the reaction. A clean bounce suggests earlier buyers remain in control; a clean rejection implies supply at that crowd’s cost basis.
In ranges, fading moves into outer bands back toward VWAP can work if volatility is stable. In strong trends, prefer buying pullbacks near VWAP in uptrends or selling near VWAP in downtrends, avoiding counter-trend fades.
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Suppose BTC trends higher with a rising VWAP. Price dips from 70,200 to 69,950 and tags VWAP. The reclaim bar closes at 70,040. Entry: 70,050. Stop: 69,920 (130 points). Target 1: 70,250 (about 1.5R). Target 2: trail under higher lows or a +1σ band. If the swing low breaks, exit and record the outcome.
Anchor to the CPI spike low at 3,200. Hours later, price revisits the AVWAP near 3,260 and wicks higher. Entry: 3,270 on the bounce. Stop: 3,235. Targets: 3,330 and 3,365. If AVWAP fails decisively, the cohort anchored at the event may be underwater, and continuation down is more likely.
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VWAP weights prices by volume and therefore reflects where trading actually concentrated during the measurement period. TWAP, in contrast, weights by time and spreads orders evenly regardless of activity. If your goal is to transact near the crowd’s average price for the day, VWAP is the appropriate benchmark. If your goal is to execute steadily through thin or irregular liquidity, TWAP can be superior.
In crypto and DeFi, both concepts appear. Oracles often use time-weighted averaging to dampen manipulation risk, while discretionary traders lean on VWAP for intraday context and execution evaluation. A simple rule: use VWAP to understand participation-weighted value and TWAP to control pacing when flow is uneven.
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1. Does VWAP reset each day in crypto?
Yes. Session VWAP resets at the session start defined in your chart settings. Many tools default to 00:00 UTC. Rolling and anchored variants avoid a daily reset by design.
2. Is VWAP better than a moving average?
They answer different questions. VWAP incorporates volume to show where trading concentrated, which is useful for intraday context and execution. Moving averages smooth price only.
3. What is Anchored VWAP?
Anchored VWAP starts the calculation from a chosen bar or event and shows the volume-weighted average since that point. Traders use it to evaluate whether participants from that event are in profit.
4. Best timeframe for VWAP?
Session VWAP shines on intraday charts like 1 to 15 minutes. Anchored VWAP works on any timeframe if the anchor is meaningful and visible.5. Can I use VWAP for both execution and strategy?
Yes. Institutions benchmark fills to VWAP, and discretionary traders use it for bias, entries, and exits when combined with structure and risk rules.
Krishnan is a Bangalore-based crypto writer dedicated to simplifying complex crypto concepts. He covers blockchain, DeFi, and NFTs, with a focus on real-world asset tokenization and digital trust. Previously he has written on Real Estate related assets for NoBroker. Krishnan holds a B.Tech degree from the College of Engineering Trivandrum.
