The volume-weighted average price (VWAP) is the dollar amount traded for every securities transaction divided by the total number of securities traded for a given period of time (e.g., a day, a week, a month, etc). It is usually calculated by adding up the dollar amounts traded for every transaction (price times number of shares traded) and then dividing by the total shares traded for the period in question. It is given by the following formula:

VWAP = (Σ number of securities bought × security price)/total number of securities bought

For example, if an investor has bought 1,000 and 500 of share XYZ at USD 50 and USD 51.5, respectively, over a period of one day, then VWAP is calculated as follows:

VWAP = [(1,000 × $50) + (500 × $51.5)]/1,500 = $50.5

In this case, the VWAP is the average price at a which the share traded over a period of one day prior to the close of trading.