VWAP (Volume Weighted Average Price) is calculated by dividing the total rupee value of all trades by the total volume. It resets every day at market open. VWAP is the benchmark used by institutional traders — mutual funds, FIIs, and large operators — to assess whether they are buying or selling at a good price relative to the day's average. When price is above VWAP, bulls control the day. When below, bears dominate.
VWAP = (Σ Price × Volume) / Σ Volume, calculated cumulatively from market open. Each intraday bar contributes: Typical Price × Bar Volume. VWAP resets at 9:15 AM every day. It is only meaningful for intraday analysis — not applicable to daily, weekly, or monthly charts.
Institutions use VWAP as execution benchmark. If a large fund needs to buy 10 lakh shares, they aim to buy at or below VWAP to ensure they paid a fair price. This means stocks often find support at VWAP when institutions are accumulating. VWAP is the most important institutional price level.
VWAP breakout: When a stock breaks above VWAP with strong volume = bullish signal, take long trade. Stop loss below VWAP. Target = previous resistance. When stock breaks below VWAP with volume = bearish. This is one of the most reliable intraday strategies for NSE stocks.
After a stock breaks above VWAP and runs higher, it often pulls back to test VWAP. If it holds VWAP on pullback with reduced volume = excellent long entry. Stop loss just below VWAP. This is safer than chasing the initial breakout.
VWAP is extensively used for Nifty and Bank Nifty intraday option trading. When Nifty is above VWAP, buy CE (Call) options. When below VWAP, buy PE (Put) options. Combined with CPR levels, VWAP + CPR is one of the most popular strategies for index option traders.
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