What Is a VWAP Execution Algorithm?

VWAP is more than an indicator on a trading chart.

VWAP also stands for Volume-Weighted Average Price, a benchmark used to evaluate execution quality.

An institutional VWAP execution algorithm may attempt to distribute an order throughout a trading session in line with the market's volume pattern.

For example, it may execute more aggressively during periods when trading activity is typically higher.

The objective is often to achieve an average execution price competitive with the benchmark, subject to the order's constraints.

This is different from using VWAP as a technical indicator to enter a futures trade.

The same term appears in two contexts: execution benchmarking and market analysis. Understanding the distinction helps explain how institutional trading differs from retail chart-based strategies.