Volume Weighted Average Price (VWAP) is a trading benchmark that has gained widespread popularity among Futures traders. VWAP equips traders with a fair price valuation over a specific time, incorporating both volume and price data.

Fundamentally, VWAP is calculated by adding up the dollar amount traded for every transaction (price multiplied by the number of shares traded) and then dividing by the total shares traded for the day. The result is a line that fluctuates throughout the trading session, providing a dynamic average price.

For Futures traders, VWAP serves as a reference point for the average price that currency has traded at throughout the day, adjusted for volume. This is particularly useful to assess whether a currency pair is trading above or below the market average, thus indicating overbought or oversold conditions.

Moreover, VWAP can act as a support or resistance level in intraday trading. A price move above the VWAP line may suggest bullish sentiment, while a drop below could imply bearish tendencies. Traders often use VWAP to determine if the current price is a good deal or not, helping to optimize trade entries and exits.

In essence, VWAP offers a quantitative trend indication, allowing traders to slice through the market noise and follow where the ‘smart money’ moves, ensuring their trading strategy is aligned with the momentum of the market.