Why Is VWAP Important? A Pine Script v6 Deep Dive for Intraday Traders
VWAP (Volume-Weighted Average Price) is one of the most widely referenced benchmarks in intraday trading, used by institutional desks and algorithmic systems alike to assess whether a trade was executed at a favorable price relative to the day's volume-weighted mean. This article explains the mathematical foundation of VWAP, why it matters for intraday analysis, and how to implement a precise, session-aware VWAP indicator in Pine Script v6. 1. What Is VWAP? The Mathematical Definition VWAP is defined as the cumulative sum of price × volume divided by the cumulative sum of volume, reset at the start of each trading session: $$\text{VWAP}_t = \frac{\sum_{i=1}^{t} P_i \times V_i}{\sum_{i=1}^{t} V_i}$$ Where: $P_i$ = Typical price at bar $i$, defined as $\frac{\text{High}_i + \text{Low}_i + \text{Close}_i}{3}$ $V_i$ = Volume at bar $i$ The summation resets at the start of each new trading session (e.g., each new day on a 1...