How Is ‘Volume-Weighted Average Price’ (VWAP) Used as a Benchmark for Trade Execution?

VWAP is a trading benchmark representing the average price of an asset throughout the day, weighted by volume. Institutional traders use it to evaluate the quality of their execution, aiming to execute their large block trade at a price better than or equal to the market's VWAP.

It is a common target for algorithmic execution strategies that attempt to spread the order out over time to match the market's natural volume.