AVWAP Course: Stacking the long side
April 11, S&P500 (ES)
Each week I review key moments from recent price action in the indices. These instances will be analyzed using three methods: the tape / DOM; footprint; and candle chart. Synthesizing the three allows an understanding greater than the sum of its parts, leading to a complete understanding of the auction process. There are many great resources out there, although I am not aware of any that provide such a comprehensive study guide.
Image 1. Pumper in Chief. April 9, 2025
Stacking AVWAPs
In these examples we continue to explore the use of multiple anchored volume weighted average prices (AVWAPs) to refine trade entries - this time on the long side!
Recall the foundational piece on the theory of integrating multiple AVWAPs. We saw some examples last week on the short side, with this week’s ‘news pump’ we can use the AVWAP as a guide to gauge (and enter) for a profitable long.
This week I will share more quick examples in light of high volatility - where price action demand more reactive trading. Prior setups may not work as well in this environment, or at least until the market settles. In case of a new market regime, setups may also be rendered obsolete.
That’s okay, the market is always changing. In the meantime, the AVWAP is a timeless tool.
April 11, Stacked AVWAP Example
Remember, in volatile tape I refer to keep one VWAP anchored to the open, allowing me to gauge which side is in control of the tape. When trade decisively ‘pivots’ to either shorts of longs, I typically either ‘surf’ the opening AVWAP, or often add another for sharper entries!
Let’s take a look to what I did on Friday.
Image 2. ES 500 tick chart, anchoring VWAP to the open. April 11
That is simple enough, but not very useful as both sides battle out the open.
Image 3. ES 500 tick chart, two-way trade
In each of these attempts to lean against the AVWAP, I would have take high risk for little reward. Look at each white arrow approaching the AVWAP only to exceed it. This makes for extremely frustrating - and potentially costly - trade.
What if I suggested there was a better strategy once control was established? Could we benefit from hindsight to actually plan a trade ahead? Absolutely! The following context will be very clear.
Image 3. ES 500 tick chart, buyer initiation
