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What Is ATP In Share Market: If you’ve bought a certain product over the course of a year, and you’ve paid different amounts of money for the same quantity, it’s quite easy to figure out the average price. Take, for example, the purchase of books. If you buy 3 books at ₹200, ₹250 and ₹270, then the average price is =

₹200 + ₹250 + ₹270 / Divided by 3 = ₹240.

This is everybody’s general understanding of the average price.

But this type of calculation doesn’t necessarily apply to the stock market. So what is ATP in share market? Before we answer that question, let’s understand the difference between simple average and weighted average in the stock market.

## What Is ATP In Share Market?(Average Traded Price)

An average price is the median price of a stock, taken over a specific period of time. The use of average traded price is when you have bought the stock over a series of times. It is calculated to determine the profits/losses made by your investment over time.

In the stock market, the term volume-weighted average price is preferred as a method of calculation of average trade price. Generally, finding the average price of an item is done by adding the sum of all the values, and dividing by the number of prices. This should give us a single figure, which is the average price. But that’s not necessarily accurate in the stock market.

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## What Is Volume-Weighted Average Price (VWAP)?

To find the average price, traders prefer using the VWAP, or weighted average price. This takes into account, both the volume and price of the security. VWAP is used by traders as an indicator for technical analysis. This indicator is used as a standard to show the average price of a security, based on volume and price.

## Formula For VWAP:  ∑Price * Volume / ∑Volume

The formula to figure out VWAP is simple – Take the total value of all the transactions of a security (Price multiplied by volume), and divide it by the total volume traded over the specific time period. The price of the stock is quite important. A good price of the security has to naturally be followed up by a good demand volume.

The main reason for considering volume in the formula is to know if the stock has good demand in the market. Without volume movement, even at a good price, the stock will see no buyers.

To calculate the VWAP, first, we must find the typical price of the stock for a specific period of time. This typical price is calculated by adding the high price, low price, and closing price, divided by three.

Typical Price (TP) = [(HP+LP+CP)/3]

The Typical Price that you get from the formula, is then multiplied by volume (V), and divided by the total or cumulative volume.

## Importance And Uses Of VWAP

VWAP is a weighted average formula indicator. Most of its usage is in technical analysis by traders. The goal of VWAP is to find the average price of a security, taking into account the volume as well as the price.

VWAP allows institutions to find the right price to buy or sell a security, based on the volume movement in the market across a specific time period. While it has multiple uses, VWAP is mostly used by portfolio managers to find the ideal or fair price to buy and sell stocks.

## Importance Of VWAP

The following highlights the significance of VWAP –

### 1. Indicator For Bearish/Bullish Market

VWAP can be used as an indicator for the market and tells us if it is bearish or bullish. If the current price is below that of the VWAP, it means that the market is bearish, and if the current market price is above the VWAP then the market is bullish.

### 2. Gives An Idea Of When To Buy And Sell

As VWAP can be used to know the market movement, it gives traders an idea of when to buy and sell a stock for intraday trading. A stock trading below the VWAP line will allow traders to buy it at its low price, and sell it above the VWAP line at its high price to make a profit.