VWAP stands for Volume Weighted Average Price. It takes every trade that has happened during the current trading day, multiplies each price by the volume traded at that price, sums it all up, and divides by total volume. The result is a single number: the average price at which shares actually changed hands, weighted by how many shares traded at each level.

Why does this matter? A regular average treats a single share traded at $150 the same as a million shares traded at $145. VWAP doesn't. It reflects where the real money moved. Institutional traders use VWAP as a benchmark: if they bought shares below VWAP, they got a better-than-average price for the day.

On a chart, VWAP appears as a line that resets at market open each morning. When the price is above VWAP, buyers have been more aggressive. When below, sellers have the upper hand. It acts as a dynamic support/resistance level throughout the day, and price often bounces off it or gravitates back to it.