# Understanding VWAP Cross: A Guide to Calculations and Signals

![An experienced trader sits at a desk and uses computer charting to determine the volume-weighted average price of a security they follow.](https://www.investopedia.com/thmb/6pkN43X_48xCt_46h_jRWZScgig=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/VWAPCrossMeaningOverviewCalculationsGettyImages-1188606207-d29ec884e4d449af8fe50c7ae6c053d5.jpg)

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> **Definition**
>
> A VWAP cross is a trading indicator that occurs when a security's price crosses its volume-weighted average price (VWAP), signaling a potential buy or sell opportunity.

## What Is a VWAP Cross?

A VWAP cross is a trading indicator that occurs when a security’s price crosses the volume-weighted average price (VWAP). The VWAP is a technical indicator trendline that calculates a security's average price for the day, weighted by trading volume, to analyze price trends and liquidity.

### Key Takeaways

*   A VWAP cross occurs when a security's price crosses its volume-weighted average price (VWAP), indicating potential buy or sell opportunities.
*   The VWAP trendline is treated similarly to resistance and support levels by traders, who use it to identify key market signals.
*   The VWAP calculation involves dividing the total trade value by the total volume of shares bought, focusing on the relationship between price and volume.
*   VWAP trendlines can highlight bullish signals when a security's price and volume rise sharply, or bearish signals when they fall.
*   Understanding VWAP and its applications can aid traders and analysts in making informed decisions about price movements in securities.

## Understanding VWAP Cross Dynamics

A VWAP cross requires a trader to closely follow a [financial security’s](https://www.investopedia.com/terms/s/security.asp) current price and its volume-weighted average price (VWAP). The VWAP appears on intraday charts and will reset at the start of each new trading day or session. It displays the security's average trading price throughout the day, based on both volume and price for that security.

## How to Chart a VWAP Cross

Technical systems can typically be programmed to chart a security’s market price and VWAP through [candlestick](https://www.investopedia.com/terms/c/candlestick.asp) patterns and trendlines drawn on a technical chart. When a security’s price crosses a VWAP trendline, then a VWAP cross signal occurs.

Traders typically consider VWAP trendlines similar to resistance and support trendlines. In a VWAP charting pattern, a VWAP trendline is a single trendline charted on a candlestick chart.

This price pattern focuses on the movement of the VWAP. For a trader using a VWAP trendline, it is important to understand the VWAP’s calculation.

$\begin{aligned} &\text{VWAP} = \frac{ \text{Security Shares Bought} \times \text{Security Share Price} }{ \text{Security Shares Bought} } \\ \end{aligned}$

VWAP is a moving average trendline that allows a trader to visually chart the effects of a security’s [volume](https://www.investopedia.com/terms/v/volume.asp) in comparison to its price. The VWAP calculation is centered around the volume a security is experiencing from day to day. Other potential volume variables that may be used in conjunction with VWAP include the Positive Volume Index and the Negative Volume Index.

## Interpreting VWAP Cross Signals

VWAP is a trendline that has two influencing factors: volume and price. Thus, several scenarios can occur from changes in volume and price. Generally, VWAP can be a useful trendline to include on a trader’s candlestick chart. VWAP may be trending above or below a security’s candlestick pattern.

Inferences from the variables in VWAP are the primary drivers of buy and sell signals for traders. The immediate effects of drastic volume and price changes that can be seen from following VWAP make the VWAP trendline a popular trendline for traders to follow. If a security's price is trending below its support level, a rapid increase in volume and price simultaneously will cause the VWAP trendline to spike significantly, crossing over the security’s current price. This movement can create a potential bullish buy signal.

Adversely, if VWAP has been high and spikes to the downside, it can be a [bearish](https://www.investopedia.com/terms/b/bear.asp) sell signal indicating that the security is expected to trend lower following the cross pattern. Using a VWAP trendline and VWAP cross can help a technical analyst detect price movement in securities that may not yet be fully factored into the security’s short-term or long-term price.