In this lesson
- see on three trades why VWAP is not an ordinary average
- find out how Binance computes VWAP and how other platforms do
- see VWAP on an hourly chart and switch it on in Binance
An ordinary average is like a vote where everyone has one voice. VWAP is a shareholders' vote: whoever brought more money decides more. Professor Wick protested for a while – then he found out that a whale with two bitcoins simply outvotes ten small traders with fractions.
Three trades, two averages#
The VWAP (volume-weighted average price) multiplies each price by how much was traded at it. Picture three trades:
| Trade | Price | Amount | Price × amount |
|---|---|---|---|
| 1 | 60,000 | 0.1 BTC | 6,000 |
| 2 | 61,000 | 0.1 BTC | 6,100 |
| 3 | 59,000 | 2 BTC | 118,000 |
- Ordinary average: (60,000 + 61,000 + 59,000) / 3 = 60,000.
- VWAP: (6,000 + 6,100 + 118,000) / 2.2 BTC = 59,136.
The big trade at 59,000 pulled VWAP almost all the way to itself. VWAP therefore answers: how much, on average, did the people who actually traded pay? On a chart, instead of individual trades it uses each candle's typical price (high + low + close) / 3 and its volume.
A window or a day?#
This is where platforms differ:
- Binance computes VWAP from the last 14 candles (the Length 14 setting) – the window moves like a moving average's.
- Many other platforms compute VWAP from the start of the day (session VWAP) and start again at midnight.
Both versions are honest; they just answer a different question: "what was paid over the last 14 candles" versus "what was paid today". On a daily chart mainly the first makes sense – and even so, VWAP is at home on hourly and shorter charts.
On an hourly chart#
- VWAP 14 – volume-weighted average price over the last 14 candles
- Volume (panel below the chart)
When the price is above VWAP, those who bought over the last 14 hours are on average in profit; below it, at a loss. That is why mainly short-term traders watch it as the "fair price" of the last few hours.
On Binance#
Original mode → indicator icon → Main Indicator → VWAP. It has one setting: the length (Length, default 14). In the video the chart switches to 1H, MA is switched off and VWAP on:
VWAP is not price support
VWAP shows the average price at which people traded recently – nothing more. The price can cross it back and forth several times a day. And since Binance and others compute it differently, the same chart can show two different "VWAP" lines.
Common myths#
- "VWAP is just another moving average." An average counts every candle the same; VWAP counts by volume.
- "VWAP is the same everywhere." Binance uses a window of 14 candles, other platforms start from zero every day.
- "VWAP suits a weekly chart." On long timeframes it loses its meaning – it is a tool for hours, not months.
Summary
- VWAP = sum of (typical price × volume) / sum of volume; big trades weigh more.
- Binance computes VWAP from the last 14 candles, other platforms often from the start of the day.
- It suits hourly and shorter charts best.
- On Binance: Original → indicator icon → Main Indicator → VWAP (Length 14).