Most folks experienced in intraday stock and futures trading are aware of the VWAP, which stands for Volume-Weighted Average Price. VWAP is important for a couple of reasons. First, market makers’ buy and sell performance is often gauged relative to the day’s VWAP prices, so they tend to take action near it. Second, many accumulation and distribution algorithms are designed to trade at or near the VWAP – or as far away from it as is statistically probable to get the best prices.
If you are a value-oriented trader (meaning one who trades extremes back to value or breaks from value), then the VWAP pack is one you may find you won’t ever want to be without. Maybe that’s overstating it a bit. Or not. You be the judge.