Volume & money flowAnchored VWAP · AVWAP
VWAP begun from a chosen event — a swing low, earnings, or an IPO — instead of the session open.
Works in most conditionsEngine-computed on a fixed sample series
What it is
Anchored VWAP is a version of the Volume-Weighted Average Price that you pin to a specific, meaningful moment in a chart's history rather than resetting it every session. Popularized by Brian Shannon, it answers a precise question: what is the average price actually paid, weighted by volume, by everyone who has traded since a chosen event — a major swing low, an earnings report, a gap, or a stock's first day of trading? That average becomes a reference the whole market implicitly cares about, because it marks the break-even point of the crowd that got involved at that event. Where ordinary VWAP is an intraday tool that forgets yesterday, Anchored VWAP carries the memory of a chosen turning point forward for as long as you like.
How it's calculated
From the anchor bar onward, the indicator keeps a running sum of price times volume and a running sum of volume, and at each bar it divides the first by the second. The price used per bar is typically the typical price, (High + Low + Close) / 3, though some implementations use the close. Because both sums start at the anchor and accumulate, every bar since the anchor contributes to the line in proportion to how much volume traded at its price. Early on, the line sits near the anchor's price; as more volume accumulates, the average settles toward wherever the bulk of trading has occurred. The only real input is the anchor point — the calculation itself is fixed once that is chosen.
Reading it, step by step
If price is trading above an Anchored VWAP pinned to a swing low, everyone who bought since that low is, on average, in profit, and they tend to defend the level on pullbacks, so it acts as support. If price falls below that line, the same crowd is on average underwater, and the level flips to resistance as trapped buyers sell into rallies to get out at break-even. An Anchored VWAP set to a high works in mirror image, marking the average pain of those who bought the top. When two anchored lines from different significant events sit near each other, they often bracket price as a support-resistance zone. Watching how cleanly price reacts at the line — a sharp bounce or rejection — tells you how much the market respects that particular anchor.
Best timeframes and settings
Anchored VWAP has no length setting; its behavior is governed entirely by where you place the anchor, which makes anchor selection the whole skill. It is used across all timeframes: intraday traders anchor to the day's open, a morning high or a news spike, while swing and position traders anchor to earnings dates, major pivots or IPO day and hold the line for weeks or months. On liquid instruments with reliable volume it is most trustworthy; on thin names or volume-less markets like spot forex it degrades. The trade-off is not responsiveness versus noise but relevance — an anchor tied to an event the market genuinely reacted to produces a line traders watch, while an arbitrary anchor produces a meaningless line. Choosing anchors that coincide with obvious, high-volume events is the way to keep the tool sharp.
When and where to use it
Anchored VWAP is most powerful on volume-bearing instruments — stocks, ETFs and futures — around events that reset the market's cost basis: earnings, gaps, capitulation lows, breakout days and IPOs. It works in both trending and ranging contexts, because it is a reference level rather than a directional signal, though its cleanest reactions come at anchors institutions are known to watch. Use it to locate where the crowd from a specific event breaks even and to judge whether that crowd is defending or capitulating. It is less useful where volume is unreliable and where no single event dominates the recent history. Avoid anchoring to trivial bars; the tool rewards deliberate, event-driven anchor choices.
Strategies that use it
The reclaim strategy anchors to a significant high that price has been trading below, then buys when price reclaims and holds above the line, reasoning that the trapped sellers have been absorbed; the stop sits just below the line. The rejection strategy anchors to a swing low in an uptrend and buys pullbacks that touch and hold the rising line, using it as dynamic support with a stop just beneath. A third, institutional-footprint strategy anchors to the earnings gap and trades the first clean test of that line, since post-earnings Anchored VWAP frequently marks where large holders defend or abandon their new positions. In each, the line is both the decision level and the stop reference, giving a tight, logical place to be wrong.
Combining it with other indicators
Because Anchored VWAP is a level, it combines well with structure and momentum rather than with other averages. Horizontal support-and-resistance, prior swing points and round numbers that coincide with the line create confluence zones that react more reliably. Multiple anchored lines from different events — say, one from the yearly low and one from the last earnings gap — can be layered so that where they cluster marks a strong zone. Volume Profile pairs naturally, since a high-volume node sitting on top of an anchored line doubly confirms a level the market cares about. A momentum oscillator like RSI can time the entry once price reaches the line, confirming that the bounce or rejection has force.
Where it fails
The tool is only as good as its anchor: pin it to a bar nobody cares about and you get a line no one is watching and no edge. Because anchor choice is discretionary, two traders anchoring to different events see different levels, so there is no single correct Anchored VWAP the way there is a single 50-day average. Trading the mere touch of the line blindly is a common mistake, since price often slices through a line that has lost its relevance as newer events reset the crowd's cost basis. On thin or volume-less instruments the calculation is unreliable. The remedies are to anchor only to genuinely significant, high-volume events, to confirm reactions with price structure rather than trading the touch on faith, and to re-anchor as new dominant events occur.
A worked example
A stock gaps up from $80 to $92 on a strong earnings report, then drifts over the next three weeks. A trader drops an Anchored VWAP on the earnings-gap bar; the line accumulates and settles around $89, marking the average price paid by everyone who chased the post-earnings move. Price pulls back to $89, tags the line, and holds — the earnings buyers are defending their break-even — so the trader goes long at $89.20 with a stop at $88, just below the line. Over the next month price trends up to $98 as the rising line continues to act as support on each dip. The trade worked because the anchor was a real, high-volume event that reset the crowd's cost basis, giving the line genuine gravitational pull rather than being an arbitrary mark.