VWAP – Volume Weighted Average Price


Written by Anna Niedobova

Updated: 2022-04-29 05:33:08

Market type execution is done based on the currently available liquidity (also called "market depth") in the market. In order to keep track of the liquidity that XTB offers, you need to activate its preview in xStation (Settings/Show Market Depth).

This way, in the Market Watch, you can observe what is the currently available volume on the given instrument, taking into account the five closest price levels, called the "order book" (note: not activating the market depth preview does not change the execution method).

If the volume (position size) that the client wants to open on a given instrument exceeds the currently available liquidity present at the first price level, the order will be executed using the depth at subsequent levels. The xStation platform automatically calculates the price taking into account the volume entered by the client:

In the example presented above, if we open a position with the volume of 10 lots on the DE30 instrument, the BID price will be 12857.9 and the ASK price 12860.3. These prices are different than those in the first level (visible on the default chart), because they take into account the currently available volume. Also the spread in Market Watch is displayed showing the available liquidity and is equal to 2.4 points.

In the example of opening a long position, i.e. buying 10 lots of DE30, it is clear that there is not enough liquidity at the first price level, so the order will be executed using liquidity from three price levels - 3 lots from the first level, at 12860, 4 lots from the second level, at 12860.2 and the remaining 3 lots from the third level, at 12860.7.

This type of execution, using several price levels, is called VWAP (Volume Weighted Average Price) execution. The xStation platform calculates such a price automatically, and it may be verified as follows:


In case of opening a short position, i.e. selling 10 lots of DE30, the VWAP price

calculation would be as follows:


It is worth to note that VWAP order execution also applies to OMI instruments.

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