Definition

The Anchored VWAP is a specialized version of the Volume Weighted Average Price that allows traders to calculate the VWAP from a specific starting point or "anchor." The VWAP is an essential trading benchmark that combines both volume and price to show the average price at which a security has traded over a given period, weighted by volume. By "anchoring" the VWAP to a particular event or time (such as earnings announcements, significant news, or the start of a trend), traders can gain unique insights into market behavior from that point onward.

Suggested Trading Use

Traders can use the Anchored VWAP to identify key support and resistance levels from a specific event or time. If the price is above the Anchored VWAP, it might be considered a support level, and if it's below, it could act as resistance.

For example, by anchoring the VWAP to the start of a strong bullish trend, traders can observe how the price behaves relative to this average, using it as a potential entry or exit point. If the price consistently stays above the Anchored VWAP, it may suggest continued bullish momentum. Conversely, a move below the Anchored VWAP may indicate a potential reversal or pause in the trend.

The Anchored VWAP provides a more customizable perspective of market dynamics and can be particularly valuable in understanding how specific events impact price and volume behavior. It's a helpful tool for traders seeking to tailor their strategies to unique market conditions and historical events.