VWAP is the Volume-Weighted Average Price: the average price over a session, weighted by how much volume traded at each price. Unlike a simple moving average, it gives more weight to high-volume prices, so it represents the 'true' average price most participants actually paid. It is the single most-watched intraday benchmark, especially by institutions.
Why it matters
Large funds are often judged on whether they filled better than VWAP, so they actively trade around it — which makes VWAP a self-fulfilling level of support and resistance. Price above VWAP means the average buyer today is in profit (bullish control); below means the average buyer is underwater (bearish). It resets each session, anchoring intraday bias.
The bands
VWAP is often drawn with standard-deviation bands above and below, like Bollinger Bands anchored to VWAP. Price tends to oscillate within the first band in normal conditions; pushes to the second or third band mark statistical extremes that often mean-revert back toward VWAP. The bands turn VWAP into both a trend reference (which side) and a stretch gauge (how far).
Anchored VWAP
A powerful variant is anchored VWAP — starting the calculation from a specific significant event (a major high, low, or news candle) instead of the session open. The anchored VWAP shows the average price of everyone who has traded since that event, which often becomes a key support/resistance level. It is one of the most respected tools among professional discretionary traders.