VWAP (volume-weighted average price) is the ratio of the value of securities traded to the total volume traded over a given period of time (usually one day). In other words, it is the dollar amount traded for every transaction (price times shares traded) related to the total shares traded for a specific period of time. It is used to gauge the average price of a security traded at over the period of choice.

The disadvantages of VWAP are:

• It does not account for opportunity cost.
• It can be used to manipulate trading by placing trades only when market prices are at levels favorable with VWAP.
• It may be inaccurate or misleading for large orders that require many days to fill.