What is the Volume Weighted Average Price (VWAP) in cryptocurrency?
When trading in the cryptocurrency market, various indicators are used to track price movements. One of them is Volume Weighted Average Price (VWAP). VWAP is an average price calculated by multiplying the price of each cryptocurrency traded in a given time period by the trading volume at that price. In this way, prices with high trading volume gain more weight and reflect the real state of the market.
VWAP is displayed as a moving line on a chart, and whether the price is above or below the VWAP gives clues about the direction of the market. Generally, when the price is above the VWAP, the market is bullish and is a good time to buy. When the price is below the VWAP, the market is bearish and is a good time to sell.
VWAP also acts as support and resistance levels. When the price approaches the VWAP, a reaction at this level is expected. Once the price breaks the VWAP, this level becomes a new support or resistance and the price is expected to follow the ongoing trend.
VWAP is a useful indicator especially for short-term traders. By observing the difference between VWAP and price, it is possible to determine entry and exit points to the market. It is also possible to obtain more reliable signals by using VWAP in combination with other indicators or technical analysis tools.
VWAP is an indicator that can adapt to the dynamic nature of the cryptocurrency market and takes into account the trading volume. Therefore, using VWAP to trade cryptocurrencies can give traders an advantage.