What is VWAP?
VWAP stands for ‘Volume Weighted Average Price’ and applies to market execution orders
If the requested volume is not available all at the same price, the order will automatically execute the maximum volume at the best available price, and then the remaining volume at the next best price and so forth. An average of all these prices is then taken, which is the price the order will execute at (the VWAP).
All stop orders, once triggered, are subject to ‘Market Execution’ which means that FxPro will automatically aggregate all available liquidity at the best possible prices and fill your stop orders at first available VWAP. The VWAP price may be on, above, or below your requested price.
Please see the relevant section of our Order Execution policy: Market Execution Order Market order is the intention to either buy or sell at the current market price, subject to the liquidity available. In the event, there is not enough liquidity at the top of the book to fill a Client’s market order, the system will automatically aggregate the volume received from third party liquidity/ price provider(s) and execute the market order at the ‘Volume-Weighted Average Price’ (‘VWAP’), subject to the liquidity available at the time of the execution.
Example:
The image above shows a snapshot of the Depth of Market for EURUSD.
The right hand side shows ASK prices (price at which you buy)
The left hand side shows BID prices (price at which you sell)
Each tier displays the volume available at each price tier. For example, a trade of 2.50 lots or lower, would receive the top of the book price (the first row of prices). And for trade size above this, the overall price would be calculated according to the price tiers and volumes available at each.
For example, lets say we want to Sell 8 lots (800k units of EUR). The order will be executed as follows:
250,000 * 1.16520 = 291,300
500,000 * 1.16519 = 582,595
50,000 * 1.16518 = 58,259
You then add up all the tiers = 932,154 and divide by your trade size in units
932,154 / 800,000 = 1.16519 (rounded to 5 decimal places)