Glossary Term

VWAP

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VWAP is the volume-weighted average price for a given trade that is filled by more than one limit order on the bid or ask side of the orderbook. For instance, you are trying to purchase a large quantity of dollars on the open market. The first ask price in the order book is for a third of the volume you require, the second price is for another third and the third order covers the remaining third of your order. Each of these three ‘tiers’ of liquidity are priced differently. The volume-weighted average price is the average price of the three liquidity tiers that your order had to eat through before being filled.

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What is VWAP? A Traders Expert explanation

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