VWAP explained: the institutional benchmark price

How VWAP is built

Every candle has a typical price (high + low + close) / 3 and a traded volume. VWAP is the running sum of (typical price × volume) divided by the running sum of volume since the session started. It re-anchors at the start of each day.

Because volume weights it, VWAP gives more importance to candles where many shares actually changed hands. A low-volume spike does not move VWAP much; a high-volume crawl does.

Why traders watch the deviation

Institutional algorithms target VWAP — they want their average fill near the day's VWAP, not far above or below it. This makes VWAP a self-fulfilling magnet on intraday timeframes. Price above VWAP and trending higher: most of today's volume was bought lower than the current price. Price below VWAP: most of today's volume was bought higher.

VWAP standard deviation bands (typically 1σ and 2σ) extend the indicator. Price reaching 2σ above VWAP often pauses; reaching 2σ below often bounces — provided the underlying trend isn't overwhelming.

How Signodex uses VWAP

Signodex computes session VWAP for stocks and intraday crypto charts, and feeds the current deviation into the AI Signal Analyst. The AI characterises position above/below ("the asset is trading 1.4σ above VWAP, indicating today's buyers are paying premium") without making a trade recommendation.