Flow Weighted Average calculates an average value by considering the quantity or volume associated with each data point. This method assigns greater significance to data points with higher transactional flow or volume. It provides a more representative average when individual values have varying levels of influence. This calculation is particularly useful in financial markets for understanding price movements relative to trading activity.
Context
In cryptocurrency markets, applying a flow weighted average can offer a more precise understanding of price trends by accounting for trade volume at different price points. Analyzing this metric helps traders and analysts discern true market sentiment from smaller, less impactful transactions. It is a valuable tool for assessing the significance of price levels and identifying areas of strong market conviction.
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