VWAP is used as an acronym for a technical analysis concept that stands for volume weighted average. The volume-weighted average is used as an indicator of the average price of a cryptocurrency asset based on volume over a given time period. The VWAP indicator can provide multiple insights at the same time, as it includes not only price information but also volume information. Accordingly, it is possible to gain insight into the value and trend of a cryptocurrency asset using the VWAP indicator.
How Does the VWAP Indicator Work?
The VWAP indicator is used for chart analysis within a one-day time frame. If the prices go below the VWAP, it is possible to say that the trend is downward. Likewise, if prices are hovering above the VWAP, there is an uptrend.
How is VWAP Calculated?
Data from the first five minutes of a day are used to calculate VWAP. The highest, lowest, and closing numbers in the first five minutes are added up. The typical price is obtained by dividing this sum by three. The resulting typical price is multiplied by the volume of the time period it is in. VWAP is calculated when the result is divided by the total volume.