Average Price

The Average Price is a measure of price calculated by taking the prices of each trade divided by the number of trades being executed. The average price reduces the range into a single value, which can then be compared to any point on the graph, or absolute price, to determine if the value is higher or lower than what would be expected.

Where there is a set of numbers, it is useful to calculate the Average Price to simplify all this numbers into a single price.

Signals

Where the current price is higher than the average price it implies that the instrument is at an unusual high, and hence may be expected to reduce to a more realistic level. Where the current price is lower than the average price then we would expect it to rise to a more realistic level.

Calculation

AP = (a1+a1+...+an)/n

For Example if over a 3-weeks period the closing price of the EUR/USD at the end of each week was 1.42, 1.37 and 1.30, then the average price of EUR/USD for this period would be:

(1.42+1.37+1.30) / 3 = 1.363