VWAP Indicator

Volume-Weighted Average Price (VWAP) is the ratio of the value traded to total volume traded over a particular time horizon. The time horizon is usually a day although other time horizons are sometimes used such as weekly, monthly and quarterly.

VWAP is often used as a trading benchmark by investors who aim to be as passive as possible in their execution. Many pension funds, and some mutual funds, fall into this category.

The aim of using a VWAP trading target is to ensure that the trader executing the order does so in-line with volume on the market. It is sometimes argued that such execution reduces transaction costs by minimising market impact costs (the additional cost due to the market impact, i.e. the adverse effect of a trader's activities on the price of a security). The VWAP can be considered as a �fair price�.

In addition to computing and plotting the VWAP, this indicator also plots standard deviation bands. The indicator can compute VWAP for daily, weekly, monthly and quarterly time-frames, as well as hourly and 4-hourly.

This indicator supports FXCM�s �Real Volume� indicator. This indicator can provide real volume direct from FXCM�s order books. However, there are a few things to note:

• The �Real Volume� indicator has to be installed separately. The indicator can be obtained from �FXCM Apps� site
• The real volume data is only available for certain high liquidity instruments (currently: EUR/USD, USD/JPY, GBP/USD, EUR/JPY, AUD/USD, GBP/JPY, USD/CAD, AUD/JPY, USD/CHF, EUR/CHF, NZD/USD, EUR/AUD, EUR/GBP and EUR/CAD)

If �Real Volume� data is not available, then the indicator can use tick volume data instead.

This indicator is now available on the store.