How it is calculated
VWAP is calculated by multiplying the price of each trade during the day by its volume, summing these values, and dividing by the total volume traded. Unlike a simple average of the open and close, it more heavily reflects price levels where trading volume was high.
How it is used
Institutional investors often use VWAP as a benchmark price when executing large orders while limiting market impact, and some individual investors refer to it as one reference point for day-trading levels. That said, VWAP itself does not indicate future price movements.