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How Does a Volume-Weighted Average Price (VWAP) Differ from a Simple Average in Settlement?

VWAP weights prices by the volume traded at that price, making it a more representative and manipulation-resistant average than a simple average.
Greeks.Live22.11.25

How Does a Volume-Weighted Average Price (VWAP) Differ from a Simple Average in Settlement?

A simple average calculates the mean of all observed prices over a period, treating each price equally. A Volume-Weighted Average Price (VWAP) calculates the average price weighted by the trading volume at each price level.

VWAP is considered a more representative measure of the true market price because it gives greater importance to prices where more trading activity occurred. This makes it harder to manipulate with low-volume trades.

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