VWAP stands for Volume-Weighted Average Price. It is an indicator plotted with upper and lower bands representing overbought and oversold areas. The middle line is the VWAP.
Both upper and lower bands are plotted with a specified number of standard deviations above the VWAP. The standard deviations use the difference between the price and the VWAP.
The VWAP (middle line) is a volume based indicator calculated using the price and the volume.
I use the VWAP to determine if a stock is up-trending or down-trending on a 1minute, 5minute and 10 minute chart. I also use it to determine if there are more sellers than buyers and if the stock is over bought and over sold.
You can add the study to a ThinkOrSwim chart by click the “Studies” icon and then “Edit Studies”. Search for VWAP and double click it to add it to your chart.
You can also change the colors of the upper and lower lines (or bands if you will). Click the gear icon when in the edit studies window to change the colors.