VWAP is a trading acronym for Volume-Weighted Average Price, the ratio of the value traded to total volume traded over a particular time horizon (usually one day). It is a measure of the average price a stock traded at over the trading horizon.
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[by whom?] that such execution reduces transaction costs by minimizing market impact (the adverse effect of a trader's activities on the price of a security).
VWAP can be measured between any two points in time but is displayed as the one corresponding to elapsed time during the trading day by information provider.