Mastering Anchored VWAP Trading: Strategies, Tips, and Tools

 Anchored VWAP (Volume-Weighted Average Price) is an incredibly powerful tool for traders, providing insights into market trends, price action, and buyer-seller balance. This article dives deep into anchored VWAP trading strategies, common mistakes, and how to effectively use it across popular platforms like TradingView, Zerodha, Webull, and Chartink.

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What is the Anchored VWAP?

The Anchored VWAP calculates the average price weighted by volume, starting from a specific point on the chart. Unlike the traditional VWAP that resets daily, the anchored VWAP allows traders to pinpoint key events or timeframes (e.g., earnings reports, breakouts, or pullbacks) and track the price-volume relationship from that point onward.

Where to Set the Anchored VWAP?

Setting the anchored VWAP requires careful analysis. Common anchoring points include:

1. Significant Highs or Lows – Mark reversal points to identify market sentiment shifts.
2. Breakouts or Breakdown Points – Anchor at breakout points to gauge the trend's strength.
3. News or Earnings Releases – Measure the price impact of major announcements.
4. Start of a Trend – Use the beginning of a strong rally or sell-off as an anchor.

Illustration: A chart showcasing multiple anchor points and the resulting VWAP curves.

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Is VWAP Bullish or Bearish?

VWAP and anchored VWAP act as benchmarks for determining price sentiment:

• Above VWAP (Bullish): Indicates strong demand and a potential uptrend.
• Below VWAP (Bearish): Reflects selling pressure and a potential downtrend.

Anchored VWAP Trading Strategies and Mistakes to Avoid

Strategies:

1. Trend Confirmation: Use anchored VWAP to confirm a trend's strength by observing price interactions.
2. Support and Resistance: Treat the VWAP line as a dynamic support/resistance level.
3. Reversal Identification: Look for divergences between price and anchored VWAP to anticipate reversals.

Mistakes to Avoid:

1. Over-relying on a single anchor point.
2. Ignoring market context or volume patterns.
3. Misinterpreting VWAP during low-volume periods.

What is the Difference Between VWAP & Anchored VWAP?

• VWAP: Resets daily and provides the average price-volume relationship for intraday trading.
• Anchored VWAP: Begins at a specific point, offering a more customized and strategic view of price trends.

When, Where, Why to Set Anchored VWAP?

• When: During significant market events or shifts.
• Where: Key highs, lows, or breakout levels.
• Why: To align trading decisions with volume-weighted price action.

Anchored VWAP: How To Use This POWERFUL Indicator

The anchored VWAP helps identify entry and exit points, determine trend strength, and provide dynamic support/resistance. Combine it with other indicators, such as RSI or MACD, for higher accuracy.

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Maximum Trading Gains Using Anchored VWAP

1. Identify high-probability trades by anchoring VWAP to significant events.
2. Use confluences with trendlines or Fibonacci levels for precise entries.
3. Exit trades when price consistently breaks and closes beyond the anchored VWAP.

Anchored VWAP for Day Trading

Day traders use anchored VWAP to:

• Spot intraday trends.
• Establish intraday support and resistance.
• Confirm breakout or breakdown strength.

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How to Use Anchored VWAP in TradingView

1. Open a chart in TradingView.
2. Select the Anchored VWAP tool from the indicator library.
3. Click on the desired anchoring point to apply the indicator.

How to Use Anchored VWAP in Zerodha

1. Open the Kite charting platform.
2. Navigate to the indicators section and search for Anchored VWAP.
3. Set the anchor point and customize the settings as needed.

How to Use Anchored VWAP in Webull

1. Open a chart on Webull.
2. Add the Anchored VWAP from the indicators menu.
3. Drag and drop the anchor to your desired point.

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How to Use Anchored VWAP in Chartink

1. Login to Chartink and access a stock chart.
2. Search for Anchored VWAP under custom indicators.
3. Choose the anchoring point and analyze the results.

Anchored VWAP is an invaluable tool that, when used correctly, can provide traders with a clear edge in the market. Experiment with different anchor points, avoid common pitfalls, and make it part of your trading toolkit for improved results!