VWAP Volume Weighted Average Price MT5

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Key Features and Advantages of VWAP

1. 🎯 It Shows the "True Price" or "Consensus Price"

This is its most important feature. While a Simple Moving Average (MA) gives equal weight to every price, VWAP tells us what the average price really is, based on where the majority of money (volume) agreed to trade.

• Example: If the price of 100 had 1,000,000 shares traded, but the price of 101 only had 100 shares traded... VWAP will give significantly more weight to the 100 price.

2. 🏦 It Acts as a Strong Psychological Support/Resistance

Because financial institutions, funds, and large traders (Smart Money) use VWAP as a primary benchmark to measure their trading performance (e.g., trying to buy below VWAP or sell above VWAP), it becomes a significant level.

• When all the major players are watching the same line, the VWAP line often automatically becomes a powerful Support or Resistance level. When the price pulls back to the VWAP, there is often a buying response, or when it moves far above, there may be profit-taking.

3. ⚖️ It Helps Judge "Fair Value"

VWAP allows us to easily assess if the current price is "expensive" or "cheap" relative to the average for that session.

• Price is Above VWAP: The market views this as "expensive" (Premium) or in an Uptrend bias.

• Price is Below VWAP: The market views this as "cheap" (Discount) or in a Downtrend bias.

Many traders use a simple strategy of looking to "Buy" (Long) when the price is below VWAP and looking to "Sell" (Short) when the price is above VWAP.