: If a breakout over an AVWAP occurs on low volume, it is likely a trap. Get the Complete PDF Reference Guide
Find a significant market peak, trough, or high-volume earnings gap.
Open your charting platform (e.g., TradingView or TrendSpider). Search the indicators tab for .
Anchored VWAP solves this limitation. Developed originally by late market technician Brian Shannon, AVWAP lets you pick the exact starting point (the "anchor") for calculation. The tool computes the cumulative volume and price data from that specific moment forward, remaining continuous across days, weeks, or months until you manually adjust it. The Mathematical Edge maximum trading gains with anchored vwap pdf download
For currencies, commodities, and index futures, anchor to major macroeconomic events. Key events include Federal Reserve interest rate decisions, Consumer Price Index (CPI) releases, or Non-Farm Payrolls (NFP) updates.
Standard VWAP calculates the average price a security has traded at throughout the day, based on both volume and price. However, its relevance fades across multiple days because it resets at every market open.
Volume Profile shows you the "Point of Control" (POC)—the price where the most volume occurred. If your Anchored VWAP aligns with the POC, you have discovered the most significant support level on the chart. The probability of a bounce approaches 80-90%. : If a breakout over an AVWAP occurs
AVWAP represents the average price paid by all participants since a specific point in time, making it a 100% objective measure of who is in control (buyers vs. sellers).
: Buy the stock when it breaks out above the heavy resistance of the AVWAP line on above-average volume.
Significant events to "anchor" from include: Search the indicators tab for
Major swing highs or lows, year-to-date (YTD) levels. Time-based: Beginning of the day, week, month, or year. Event-based: IPO day, earnings announcements, or Fed news. Support & Resistance:
Traditional VWAP calculates the average price of a security weighted by volume, resetting each trading day. It tells you, as the day progresses, whether you're trading above or below the average price paid by all market participants.
While understanding the theory is a great start, mastering AVWAP requires rigorous backtesting, chart study, and practical application. Many traders look for educational materials and guides to accelerate their learning curve.
Price breaks below your Anchored VWAP on heavy volume. Action: Do not buy the dip. The anchor has now flipped from support to resistance. The Trade: Wait for a retest of the Anchored VWAP from below. Short the stock with a tight stop above the anchored line. The expected move is a swift retracement to the previous low. Gain Potential: Because you are trading against trapped buyers, the velocity of the move is often explosive—yielding 4:1 risk-reward in a matter of hours.
Standard profit targets (1:2 risk/reward) are arbitrary. With Anchored VWAP, your first profit target is often the of the anchored VWAP. Historical data shows that price tends to oscillate between the -1/+1 and -2/+2 standard deviation bands. This gives you objective, volume-weighted targets to harvest gains.