Ticker&TapeAnchored VWAP: where buyers are in profit
Anchored VWAP answers a simple question: since a given day, what price has the average buyer paid? If the stock is above that line, those buyers are in profit. If it is below, they are under water.
What VWAP means
VWAP stands for volume-weighted average price. Instead of averaging closing prices like a moving average, it weights each price by how many shares traded there. A day with huge volume counts much more than a quiet day.
Day traders use a VWAP that resets every morning. Anchored VWAP is different: you pick the starting day yourself, and the line keeps adding every bar from that point on. It shows the average cost of everyone who bought since your anchor.
Where to anchor it
The anchor should be a day that changed the story for the stock. Big funds often build positions after these events, so the line becomes a rough map of their cost.
- An earnings day: especially a big gap up or down on heavy volume.
- A base low: the lowest point of a cup or a correction, where the new advance started.
- A major high: the peak before a correction. Buyers since then are often still under water and may sell when they get back to even.
- A breakout day: to track whether buyers of the breakout are holding a gain.
How to read it
When price holds above an anchored VWAP, buyers since the anchor are in profit and have little reason to sell. Pullbacks to the line often find support, because those buyers defend their average cost.
When price falls below the line, the average buyer since the anchor is now losing money. Some will sell to get out, which adds supply. A line anchored to a prior high often acts as resistance for the same reason. This is the same logic behind support and resistance: people remember what they paid.
How traders use it
Anchored VWAP is a tool for judging support, not a buy signal. A leader that pulls back to the VWAP anchored at its last earnings gap, on light volume, and bounces is acting well. A stock that slices below that line on heavy volume is telling you the post-earnings buyers are giving up.
On the platform, add anchored VWAP from the Indicators button and choose the anchor date. Try anchoring to the last earnings marker and to the low of the current base, then see which line price has respected.
Common mistakes
- Anchoring to a random day with no news or volume behind it.
- Treating a touch of the line as an automatic buy, without checking volume.
- Using the intraday, daily-reset VWAP for swing trades that last weeks.
- Drawing so many anchored lines that the chart stops telling you anything.
Key points
- Anchored VWAP is the volume-weighted average price since a day you choose.
- Anchor it to earnings, a base low, a breakout or a major high.
- Above the line, buyers since the anchor are in profit; below it, they are losing money.
Check what you learned
Answer at least 2 of 3 correctly to complete the lesson.
1. How does anchored VWAP differ from a moving average?
A moving average averages closing prices over a fixed window. Anchored VWAP weights by volume and keeps adding every bar from your anchor, showing the average cost since then.
2. Which day makes a good anchor?
The anchor should be a day that changed the story, such as an earnings gap, a base low, a breakout or a major high.
3. A stock slices below the VWAP anchored at its last earnings gap, on heavy volume. What does that tell you?
Below the line, buyers since the anchor are under water and some sell to get out, adding supply. Heavy volume makes the warning stronger.
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