Volume weighted average price (“VWAP”) is a ratio reflecting the value traded against the total volume traded over a particular period of time, usually a day.
VWAP essentially measures the average price a stock is traded at over a certain period of time by taking both volume and price into consideration. VWAP is a powerful indicator for many reasons, but primarily because it clearly demonstrates whether a particular stock is seeing more buying or selling volume.
It allows a shrewd investor to gauge trend reversals and decide whether to go long or short on a particular stock, which is also fantastic for trading large-cap stock.
Volume is an essential indicator to to tie to VWAP for a cross long or short setup, so it is important to closely monitor volume.