# The Importance of the Average Traded Price (ATP) in Technical Analysis

Stocks are among the most volatile of all financial assets. Whenever major news about the economy or a specific corporation is revealed, a stock's price may move by several percentage points within a day. In such cases, it's hard to decide whether the reference price point for the day is the opening or closing price or another metric. Average traded price provides a fresh alternative to those typical reference points and may prove a superior tool for the technical analyst.

The Importance of the Average Traded Price (ATP) in Technical Analysis
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Average traded price, also referred to as volume-weighted average price, is what buyers have paid for one share on average, over the course of a specific time period. It is most frequently calculated for a single day but is equally useful for weekly, monthly or yearly periods. To work out the weighted average, divide the dollar amount of all trades that took place during the period by the number of shares that changed hands. The dollar amount of all trades is often reported by brokerage houses or finance portals such as Yahoo or Google Finance.

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## Calculating ATP

Say a stock opened the day at \$10, and a total of 1,000 shares changed hands at that price. Later during the day, the price rose to \$10.40, and 5,000 shares changed hands, while the last set of trades were at \$10.10 for an additional 1,000 shares. Total dollar volume equals \$10_1,000+ \$10.4_ 5,000+ \$10.1*1,000 = \$72,100. Total Volume is 1,000+5,000+1,000= 7,000 The Average Traded Price equals \$72,100 / 7,000 = \$10.30, and that's the average cost of the shares to buyers who bought them during this trading day.

## ATP Significance

ATP's significance is that it approximates what most buyers paid for the stock. Neither the opening nor the closing price provides this information. The ATP is crucial especially if the stock has a tendency to swing wildly during the day and subsequently settles close to the opening price. When important news is announced, stock prices tend to react wildly but then settle somewhat with a move in the opposite direction as the market digests this new information. Most long-term stock charts will use either just the day's closing price or the opening and closing price, neither of which provides where the majority of trading took place.