AVWAP: anchored VWAP
An AVWAP is the volume-weighted average of the prices traded since a chosen point, such as an important high or low. Whether price is above or below it shows where price stands against the average price of those who traded since that point.
What is an AVWAP?
VWAP is the volume-weighted average of the prices traded since a starting point: prices traded on heavy volume affect the average more. A daily or weekly VWAP starts from the calendar.
An anchored VWAP (AVWAP) starts not from the calendar but from an event on the chart: an important low or high, a breakout candle or the candle where a sharp move began. That makes the AVWAP an approximate reference for the average price of those who have traded since that event.
The calculation itself is explained on the VWAP page; the only thing that sets AVWAP apart is its starting point.
How it forms
- An anchor point is chosen. Usually a meaningful turning point, such as the low a rise started from or the high a decline started from.
- The totals start at that candle. Each candle's typical price is multiplied by its volume and added up, and the volumes are added up too. Both totals start at the anchor candle.
- The average updates every candle. AVWAP = total (price × volume) ÷ total volume. Each new candle shifts the average a little.
- The effect fades over time. The further from the anchor, the larger the total volume; new candles move the average less and the curve slows down.
Three states between price and the AVWAP
An AVWAP is usually read from where price stands against it.
Price above
Price is above the average of the prices traded since the anchor. Those who bought since that point are on average in profit.
Price below
Price is below the average. Those who bought since that point are on average at a loss.
Back to the AVWAP
Price comes back to the AVWAP. Watch whether pullbacks stop around this average or clear it on a close.
What it shows, what it does not prove
What it shows
- The volume-weighted average of the prices traded since the anchor
- Whether price is above or below that average
- A rough idea of whether those who traded since that point are on average in profit or at a loss
What it does not prove
- That the AVWAP will act as support or resistance
- Anyone's actual entry price; candle data summarises the candle, not individual trades
- That an AVWAP started from a different anchor would give the same result
The MarketLevelMap view
How it relates to zones
In MarketLevelMap's Price Action view the AVWAP is shown by these rules.
- The anchor is the structure's protected swing (protected low or high). When the protected level changes, the AVWAP starts again from the new anchor.
- While the structure's direction is undetermined, no AVWAP is shown.
- The values are the engine's cumulative values from the anchor; the site does not recalculate them.
- On the chart it is a light, long-dashed curve with an AVWAP label on the price axis. The curve runs up to the last closed candle the structure was computed with.
- In the "Structure" table an AVWAP row sits right below the protected level (value, anchor date and distance to price).
Often confused with
For general information only. Not investment advice.Last updated: