Nilesh Joshi – 18.04.

2021

Chart Reading
Anchored VWAP

What is VWAP?

Vwap is volume weighted average price of given underlying based on the time frame of 20,50, 100 or
any time frame is chosen to determine the average price. For example 20 moving average is chosen
then it will give the price average of last 20 candles. If chart time frame is 1 hr then VWAP will be for
the last 20 hrs and if chart time frame is day then it will be volume weighted average of last 20 days.

Note: Any price of the underlying is expected to average its price for any kind of time frame is
chosen. Average of the price can be done either time wise (i.e. consolidation is normal word used in
market) or price wise (i.e. correction).

What is AVWAP?

AVWAP is also volume weighted average price of given underlying but it will have start reference date
and it will continue to average the price from the start date chosen. It will also average based on the
time frame chosen on the chart. For example day chart is chosen and start reference date is chosen
as 22/03/2020; then it will continue to average the price from this date and plot the price. In example
below blue line is AVWAP line with starting date as 22/03/2020 on nifty day chart.

1. How to choose the start date for AVWAP:

Anchored VWAP start date is normally chosen one day before the bigger market fall was
envisaged. For example, bigger/panic market crash of 2008 or march 2020 due to Corona
news. It will give solid basis for the average of the price.

2. What are uses of AVWAP for market analysis and investment?

a. Normally fear crash of market due to any big economic recession or any pandemic news
can lead to big crash in the market. AVWAP will help to analyse the extent of the fall of
market in such situation. Market is supposed to turn bullish after touching the AVWAP
line. This will give excellent opportunity for the investment into good quality stocks as
Nilesh Joshi – 18.04.2021
they can be available at reasonably discounted price. Such situation is expected to happen
once or twice in the decade. This is golden opportunity for the investment.
b. Any underlying going for the longer period of consolidation then AVWAP line will become
straight and this is indication that break out from the underlying is expected from the
these levels any time and it is good time for the investment in these underlying.

3. Use of AVWAP for future buy and call trading

 Set up of AVWAP for the future and index in indices or any scripts would be its starting
(birth time) for the evaluation of the price movement.
 Trend of the indices or underlying should be known before using the AVWAP. Any
indices or underlying trading below 20 sma on day chart will generally be bearish
trend and upper side it will be called as bullish trend.
 Example: Bank Nifty April Future: Please refer bank nifty chart with blue colour as
AVWAP line. When ever BNF touches near will be enter point for the start of the
trading for short sell with couple of candles sustain above AVWAP shall be indication
for the stop loss of the trade.

 Choose any options that is far OTM for the trade with AVWAP plotted on the option.
In bearish trade; when ever option price touches the AVWAP point, it will be point for
the short sell of the trade. Refer example of the 32000 CE April for the example.

Note: Any underlying is in bearish trend and it touches AVWAP, trade can be initiated
for the either call short or Put buy. In case of trend is bullish then vice versa.
Nilesh Joshi – 18.04.2021

 Hilega milega system also needs to be seen along with the AVWAP trade.
 Any options traded for short should have AVWAP in down ward and for buy; it should
be upward. For flat AVWAP; generally it is to be avoided for the trading. If it is taken
then main underlying charts and hilega milega should be referred for the trade.