Anchored VWAP (Volume-Weighted Average Price) is a technical analysis tool that calculates the average price of an asset based on both price and trading volume, starting from a user-defined "anchor point" (a specific time or event) rather than from the beginning of the trading session like the traditional VWAP.
Key Features of Anchored VWAP:
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Custom Start Point – Unlike standard VWAP, which resets every trading day, Anchored VWAP allows traders to anchor the calculation to a specific moment (e.g., a major news event, a swing high/low, or an earnings release).
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Volume-Weighted – It incorporates trading volume, giving more weight to periods with higher activity.
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Used for Trend Confirmation – Traders use it to identify support/resistance levels, trend direction, and potential reversal points.
Common Anchor Points:
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Earnings announcements
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Major news events (Fed decisions, economic data)
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Breakouts/Breakdowns in price
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Swing highs/lows
How Traders Use It:
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Trend Identification: If price is above Anchored VWAP, the trend may be bullish; if below, bearish.
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Support/Resistance: Traders watch for bounces or breaks near the Anchored VWAP line.
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Institutional Activity: Since VWAP is often used by big players, it can indicate where smart money is active.
Example:
If a stock gaps up after earnings, a trader might anchor VWAP to the earnings release time to assess whether the move is sustainable or overextended.
