VWAP = the average value of a stock traded over a set time period.
For example at 9:41 AM a stock $PCG was trading at like $12.10 but the average adjusted for the entire day at that point was $12.25. So with that information you now know that at that point in time $PCG shares were trading below average.
VWAP tell you whether or not a stock is trading below or above average for the selected time period. This indicators doesn’t predict the price action (how the price is going to change) but they are just a statistical tools. This is important because it is good to know whether or not you are buying in at a higher than average price or in at a lower than average price if you are taking a position. That being said its not necessarily bad to buy in at a higher than average price (above vwap) or good to buy in at a lower than average price (below vwap). VWAP line serves as a sort of support or resistance.
If a stock is trading above vwap then the vwap line serves as a support. (In the below chart vwap is the purple line)
And when the price of a stock dips below the vwap line then that line switches to resistance.
When something breaks above resistance that’s the sign we will see higher highs and when something breaks below support that’s the sign we will see lower lows.
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