THE BITCOIN TRADING
MENTORSHIP
MASTERING
AVWAP
WRITTEN BY
EMPERORBTC
https://twitter.com/EmperorBTC
https://t.me/EmperorbtcTA
Table of Contents
1. Introduction .............................................................. 2
2. What is the AVWAP ................................................. 3
3. How AVWAP Works?............................................... 4
4. AVWAP Setups and Strategies.............................. 7
4. Conclusion ............................................................... 11
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1. Introduction
The Anchored VWAP (AVWAP) is a technical indicator
used by traders to calculate the average price of a
security based on its trading volume for a specific time
frame. It differs from the traditional VWAP as it takes into
account only the volume traded during a specified period,
often starting from a particular point in time.
After reading this material, you will be able to:
➢ Know what the AVWAP is
➢ Know how the AVWAP help in trading.
➢ Learn the best strategies and setups to use
AVWAP to make profitable trades.
Please take this tutorial as a basis for practicing on as
many charts as you can. As always, the more you
practice the more you learn.
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EmperorBTC
2
2. What is the AVWAP
The normal VWAP indicator is the session VWAP indicator that resets
after each trading session, normally a day or 24 hours. Linkbit.ly/3ErJqTN
Many traders like to improve upon it by using Anchored Volume
Weighted Average Price (AVWAP).
This indicator is exactly the same as the VWAP but can start calculating
the average price from any point on the chart. This is useful when we
want to judge traders’ bias after a significant event and get a good entry
trigger.
What is AVWAP?
The AVWAP, or Anchored VWAP, is a variant of the VWAP that takes
into account the volume and price of an asset from a specific point in
time. Unlike the VWAP, which calculates the average price of an asset
based on its volume for a given time period (usually a day), the AVWAP
allows traders to anchor the VWAP to a specific point in time and
calculate the average price of the asset from that point onwards.
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3. How AVWAP Works?
The AVWAP works by taking into account the volume and price of an
asset from a specific point in time and calculating the average price of
the asset from that point onwards. To anchor the VWAP to a specific
point in time, you need to identify a significant event or a level that you
believe has a significant impact on the asset's price.
For example, you could anchor the VWAP to the time of a major news
announcement like CPI or FOMC or a significant level of support or
resistance (more on this later). Once you've anchored the VWAP, you
can then calculate the average price of the asset from that point onwards
and use it as a reference point for making trading decisions.
Figure 1. AVWAP used after CPI release
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AVWAP setup
First, we move to the line tools
indicator on TradingView.
Second, we scroll to the absolute
bottom of that list, where we find the
Anchored VWAP.
By selecting this and clicking at any
point on the chart. It will start the
VWAP formation and calculation
from this point forward.
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4. AVWAP Setups and Strategies
1. Trend Continuation Strategy:
Use AVWAP as a guide to identify trend continuations. When the price
stays above the AVWAP line in an uptrend, it is a sign of strength, and
you can use it as a support level to look for buying opportunities.
Conversely, when the price stays below the AVWAP line in a downtrend,
it is a sign of weakness, and you can use it as a resistance level to look
for selling opportunities.
Example1: Bearish
In the following example, we set an anchor to a vital high where the price
starts to sell off, and we see how the price starts to behave around that
level.
Every time the price makes another lower high, we place the AVWAP on
that level. As long as the price doesn’t break above the AVWAP, the
trend is bearish.
Figure 2. Bearish example of the trend continuation strategy
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Example 2: Bullish
In the example below, we place a new AVWAP on each higher low the
price makes, and as the price holds above it, the trend is bullish.
Figure 3. Bullish example of the trend continuation strategy
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2. Reversal Strategy:
Use AVWAP as a potential reversal point. Draw the AVWAP from the
last high before the market starts to sell off, and wait until we break
above AVWAP, which means buyers are now in control and enter on the
retest when the AVWAP flips from resistance to support.
Figure 4. Reversal Strategy Example 1
Often, the reversal strategy won’t be so clean and you have to ignore the
noise immediately after a significant event. This is because market
participants take time to price in an event before stabilising or before one
side (buyers or sellers) gain control. Example:
Figure 5. Reversal Strategy Example 2
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3. Breakout Strategy:
AVWAP can also be used as confirmation of a breakout. When the price
breaks above the AVWAP line in an uptrend or below the AVWAP line in
a downtrend, it is a sign of a potential breakout.
In the following example, we’ll be using the AVWAP bands as well
(AVWAP as default)
First, we place the anchored VWAP at a point where a consolidation
range starts to form.
Once the price moves beyond the outer bands, it will most likely act as
support/resistance.
Figure 6. Breakout Strategy Example
In conclusion, AVWAP is a valuable tool for traders because it provides
a clearer view of the price and volume activity on a chart. By using
AVWAP, you can identify key levels of support and resistance, which
can help you make better trading decisions.
It's an objective measure of the average price of an asset, and it can be
used in a variety of trading strategies. Whether you're a beginner or an
experienced trader, AVWAP is a tool that should be a part of your
trading arsenal.
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4. Conclusion
I hope this tutorial has helped you learn what the
AVWAP is, how it works and how to implement it
in your trading strategies and setups.
I encourage you to study the trading examples
thoroughly and try to implement the techniques
explained on as many charts as you can.
We have a lot more to learn in this mentorship
series. Make sure to check all of the previously
covered tutorials, here:
EmperorBTC learning materials index
Thank you for your time. I appreciate the love and
support.
Love,
EmperorBTC
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