Anchored VWAP

Anchored VWAP (AVWAP) is a version of VWAP that starts calculating from a point you choose, rather than resetting each session. You "anchor" it to a meaningful event, such as an earnings release, a major swing low or the start of a breakout, and it shows the average price paid by everyone who traded since then. Brian Shannon of Alphatrends is widely credited with popularising the technique among traders.

How it works#

The formula is the same as regular VWAP, but the running totals start at your anchor point and never reset:

AVWAP = Σ (Typical price × Volume) ÷ Σ Volume, from the anchor bar onward

Why anchored VWAP works#

The line represents the average cost of a specific group of participants. When price returns to it:

• Holders in profit may add or defend their positions.
• Holders at a loss may sell to get out at breakeven when price returns from below.

That makes AVWAP behave like dynamic support or resistance tied to real positioning, not to an arbitrary average length.

Choosing anchors#

Good anchors are moments that changed who was involved in a market:

Avoid anchoring to random bars; the line is only meaningful when the anchor marks a real change in participation.

Trading with anchored VWAP#

1. Trend support: in an uptrend, pullbacks to the AVWAP from the swing low or a breakout often offer entries with a stop just below the line.
2. Resistance from tops: after a decline, the AVWAP from the high marks where trapped buyers break even; rallies often stall there.
3. Reclaims and losses: price moving back above a key AVWAP after falling below it suggests buyers have regained control, and vice versa.
4. Confluence: several AVWAPs from different anchors meeting in one area create a strong zone. See Level Strength and Clustering.

Anchored VWAP vs regular VWAP and moving averages#

See VWAP and Moving Averages Explained.

Limitations#

• Subjective anchors: different traders choose different anchors.
• Flattening over time: after many bars, an AVWAP moves slowly and may be far from current price.
• Too many lines: anchoring to every swing clutters the chart.

Common mistakes#

• Anchoring to insignificant bars.
• Keeping old AVWAPs long after they stopped mattering.
• Expecting precise bounces at the line rather than reactions near it.

Frequently asked questions#

What is anchored VWAP?#

A volume weighted average price calculated from a specific starting point you choose, such as an earnings date or swing low, rather than from each session open.

Where should I anchor VWAP?#

To meaningful events that changed participation: earnings, major swing highs and lows, breakouts or the start of a period.

Does anchored VWAP work on any timeframe?#

Yes, but it is most commonly used on daily and intraday charts with anchors at significant events.

Next, learn a classic cumulative volume indicator: On-Balance Volume (OBV).