What is the average price weighted volume?

The average price weighted volume concerns the total volume traded within a given time frame, such as the only trading day. The purpose of the VWAP is to determine the ratio of the value associated with all trading that has been carried out during the quoted period. This is achieved by comparing the value traded in this period with the total volume traded for the same time frame.

For investors who tend to be more reactive than proactive in their investment approach, the average price weighted with volumes can serve as an important scale. The formula can be used on a wide range of securities or focus on one safety in particular. This can ensure that any trading in the investor's safety is in line with the total level of market volume. As a means to minimize channels for volatility in the investment process, the use of an average calculation of the weighted volume price is generally relatively effective.

Using the average price of the weighted volume also works well if the purpose of the investment isProvide some type of future nest, for example with a pension plan. Because the calculation of the average price of the weighted volume can help identify investment opportunities that are well done and seem to bear lower risk, the strategy is ideal for conservative investors. Although yields may not be spectacular in terms of daily profits, stable accrual values ​​will help provide great stability to the pension plan.

While the formula for calculating the volume average price is sometimes applied for a period of less than one day, many analysts tend to consider this application of no actual value. To create a real scale, it is necessary to take into account the overall activity between opening and closing the market day. However, the method of the average price of the weighted volume will work well if it is used for a longer period, such as two consecutive business days or a solid week of trading.