Forum Archive Index - October 2001

["Robin Court" <rugila@xtra.co.nz>]

Quote

Investorwords.com defines VWAP as
"A measure of the price at which the majority of a given day's trading in a given security took place. Calculated by taking the weighted average of the prices of each trade. The method is used by institutional traders, who often break a given trade into multiple transactions. "
Iguana2 agrees with this definition

Unquote

 

Comment

Perhaps Iguana2 might find it useful to learn some basic statistics. Since they deal with a lot of financial data which may influence others, some statistical accuracy might be useful to other  readers also.

The price at which the majority of transactions occur is the modal price. The weighted average is the mean price. These would only be equal if prices at which transactions occur are symmetrically spread over the day's trading. In the more interesting and probably more important cases where the price of the relevant security is showing a strong uptrend or downtrend this is highly unlikely to be the case, and the above definition is both confused and misleading.