VWAP, which stands for volume-weighted average price, is a measure of the average price at which an asset is traded over a given period of time.
To calculate VWAP, you use the following equation:
VWAP = ∑(amount of asset bought x asset price)/total shares bought that day
The standard VWAP is calculated using all of the orders of a given trading day, but it can also be used to look at multiple time frames.
The VWAP ratio is then presented on a chart as a line.
It has been likened to a moving average, in that when the price is above the VWAP line the market is seen as in an uptrend, and when the price is below the VWAP the market is in a downtrend.