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Questions and Answers
What is VWAP?
What is VWAP?
- The weighted average of all trades in a day (correct)
- The average price of the highest volume trades in a day
- The price of the last trade of the day
- The price of the first trade of the day
What is the difference between VWAP and AVWAP?
What is the difference between VWAP and AVWAP?
- VWAP is a cumulative and dynamic calculation while AVWAP is a static calculation
- VWAP averages price and volume from any point while AVWAP averages price and volume from a user-defined start point (correct)
- VWAP is calculated for a specific time period while AVWAP is calculated for a whole day
- VWAP is used for short-term trading while AVWAP is used for long-term investing
How can AVWAP analysis help in trading?
How can AVWAP analysis help in trading?
- By identifying important price levels where sentiment is likely to change (correct)
- By predicting the future direction of the market
- By indicating the exact time to enter or exit a trade
- By showing the total number of shares traded in a day
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Study Notes
- VWAP is the volume weighted arithmetic mean of all trades for one day.
- Anchored VWAP (AVWAP) calculates the cumulative and dynamic VWAP from a user-defined start point.
- AVWAP helps to understand the shifts between buyers and sellers over any timeframe.
- The calculation and interpretation of VWAP/AVWAP is the same regardless of the anchor point or time being analyzed.
- Each share receives equal weighting in the VWAP calculation.
- AVWAP averages price and volume from any point to show who is in control of the trend.
- AVWAP analysis helps to identify important price levels where sentiment is likely to change.
- Recognizing these levels in advance helps to plan trades and manage risk.
- AVWAP analysis helps to be more discerning in trades by understanding how capital flows through markets.
- AVWAP helps to anticipate key levels and wait for price confirmation before participating in a trade.
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