Simple arithmetic average of transaction prices distorts the picture: a transaction for one lot affects it the same way as a transaction for a thousand. Weighted average price takes volume into account, so large operations have a greater impact on the result and the outcome more accurately reflects the level at which the instrument was actually traded.
The indicator is used when summarizing trading results, determining the results of auctions for placing government securities, calculating official exchange rates, and assessing a portfolio.
For an investor, it is useful as a benchmark instead of the price of the last transaction. The last transaction may be random and unrepresentative, especially for instruments with infrequent operations, whereas the weighted average shows a more stable level.
The limitation remains the same: with a small number of transactions over a period, any indicator, including the weighted average, reflects the opinion of several participants. Therefore, it should be viewed together with trading volume and the number of transactions, not separately.