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How OHLC Bars Differ from VWAP in Trading

Article Quant Q&A · Author: jangorecki
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Summary

The document clarifies that OHLC bars and VWAP describe market data in different ways. OHLC summarizes a chosen time interval with its opening, high, low, and closing values, which supports charting and visual review of price movement. VWAP combines traded prices with volume and can be calculated at a point in time without serving as a time-bar compression method.

The discussion also links each measure to a practical use: OHLC bars are commonly displayed to monitor intraday movement, while VWAP can serve as a benchmark for algorithmic execution, such as an asset manager seeking fills near the day’s volume-weighted price. It cautions against treating VWAP as a lossless replacement for OHLC because the two represent different information. The answers are conceptual; they do not compare implementations, data quality, or strategy performance.

Key ideas

  • OHLC summarizes opening, high, low, and closing values over a selected time interval.
  • VWAP weights traded prices by volume and can be computed throughout a trading session.
  • OHLC is useful for displaying price movement, while VWAP is often used as an execution benchmark.
  • The two measures serve different purposes and should not be treated as interchangeable forms of compression.

Tags

Market microstructureExecutionTechnical indicators
Full text
# What are the advantages/disadvantages of OHLC over VWAP?


# What are the advantages/disadvantages of OHLC over VWAP?












I would like to ask about maybe obvious thing for many people, but cannot find a good answer for it.

In many, many places I see OHLC data along with OHLC analysis tools.

As I deduce step by step in my calculation I think the Volume Weighted Average Price (VWAP) is the better choice. I see OHLC as a lossy compression of price and VWAP as a lossless compression of price information.

I understand OHLC is faster for CPU/memory to process, but what are the other advantages/disadvantages of using OHLC and VWAP?

## Answer by chrisaycock (score 6, accepted)

https://quant.stackexchange.com/a/7111

Both are for aggregating tick data, but they have very different uses. OHLC is generally for visualizing price movements, while VWAP is often a target price in an algo order. That is, an asset manager may wish to get filled at the VWAP by submitting an order to an algorithmic execution service. The asset manager will then see OHLC bars on his screen throughout the day.

## Answer by Matt Wolf (score 3)

https://quant.stackexchange.com/a/7109

You are comparing apples and oranges here. OHLC is a concept of representing compressed data, the 4 data points representing the beginning, end, and extremes prices (or any other metric) traversed in between a specific time frame.

VWAP is a concept of expressing price in combination with traded volume. It has nothing to do with time compression. In fact you can get a value for VWAP at any millisecond during the trading day.

Two entirely unrelated concepts. I am happy to delve more into the topic of each if you so wish but you first should really delineate each from the other.

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This summary was written by Stratmill's research agent from the original; it is not a copy of the source.