AVWAP intro and application for trading on

AVAP trading

1. Anchored VWAP
My learnings from class held on 17/04/2021 by
Nitish Sir

2. A brief introductionto
AVWAP:
It is an average of price derived from a particular price point aka Anchor price. Usually, we
take anchor price of the events of high emotional importance (extreme fear) like the
lowest price of 2008 crash as shown in the Nifty monthly Chart. AVWAP based on anchor
price of 2019 Covid crash will hold more importance going forward.
However, for plotting AVWAP, any significant price point can be used as an anchor,
depending on chosen time frame for trading.
2008 Crash
AVWAP
based on 2008 crash
-
Nifty respecting
it during Covid Crash

3. Steps to plot AVWAP
on Chart (Zerodha’s
Kite Desktop)
1.Click on Studiestab and type Anchored VWAP in the search box
2.Select Anchored VWAP from drop down, anAnchored VWAP pop up
window will open
3.Select the Anchor Date (one day prior to the extreme move happened)
e.g., in case of 2008 Crash the lowest price was hit on 27
th
Oct so we
choose 26
th
Oct as anchor date.
4.Click Doneprovided at the bottom of the pop-up window

4. Importance of
average price
line in the
movement of
an
instrument’s
price
•Price of any Instrument tends to react to its average price(like 20
SMA, 50 SMA etc.). If price has moved far away from its average
price line, then it gets back to it before moving further away this may
happen in following two ways:
•Price will fall and reach to its average line known as price wise
correction before going up.
•Price will start consolidating and average line will move up to
reach to the price in due course of time known as time wise
correction.
•Vice versa is also true when price is moving in downtrend.
•That’s why average price line works as a dynamic support and
resistance for the price of any instrument.
•It also help us in determining the trend of the instrument. If prices
are above its average and taking support at the average line before
moving further up its in uptrend.
•If price is below its average and taking resistance at average line
to move further downward then instrument is in down trend.

5. Why
Anchored
VWAP is so
special
•Since AVWAP is generated by taking the Anchor at
the point of extreme market fear so it works very
good as a support levels in the coming many years
ahead. As in the case of 2008 crash the AVWAP
plotted taking it as an anchor has not been broken till
date. It has worked extremely well during the recent
covid crash of 2020, and Nifty exactly reversed from
the AVWAP average line by taking support here as
shown in the 1st slide.
•Therefore, it is a very important tool for predicting
market bottoms and hence providing golden
opportunity to invest in the market. When used in
monthly timeframe It has a potential to double the
money within a year if one invests in blue chip
companies available at throw away prices while Nifty
is near this average.

6. How to
trade with
AVWAP
(Long Term
Investment)
Use Monthly chart of Nifty and plot AVWAP based
on anchor point of extreme fear, Covid Crash of last
year shall work very well as the anchor point for
coming many years. Whenever nifty reaches to its
AVWAP levels in monthly chart, invest in blue chip
companies to double your money within a year.

7. How to
trade with
AVWAP (For
Positional
trades)
•Use Daily chart of the respective instrument
(Option, future, Spot) and plot AVWAP based on
anchor point of any recent significant price point like
in case of option contracts its start date is the most
important date for placing anchor to plot AVWAP.
•By help of 20 SMA determine the trend (Price is
trading above 20 SMA uptrend below itdowntrend.
if it's moving up and down by crossing the
20SMAfrequently it’s a no trend market avoid it),
trend can also be identified by eyeballing the general
movement of the price.
•Once trend is determined we can trade the
instrument in the direction of trend by taking entry
near AVWAP and using SL as 2 hourly close of
candles above/below it.

8. How to
trade with
AVWAP (For
intraday
trades)
•Use hourly chart or 15 mins chart of the respective
instrument (Option, future, Spot) and plot AVWAP
based on anchor point of any recent significant price
point like in case of option contracts its start date is
the most important date for placing anchor to plot
AVWAP.
•By help of 20 SMA on daily chart determine the
trend (Price is trading above 20 SMA uptrend below
it in downtrend. if it's moving up and down
frequently by crossing the 20 SMA it’s a no trend
market avoid it), trend can also be identified by
eyeballing the general movement of the price.
•Once trend is determined we can trade the
instrument in the direction of trend by taking entry
near AVWAP and using SL as 2 close of 10 mins
candles above/below it.