Using The Anchored VWAP

Mastering Anchored VWAP for Better Trading Decisions

I’m a fan of VWAP. So are algos and so are institutions. (I like to keep good company…)

The traditional VWAP is an intraday tool, a line in the sand, a fair value point that takes into account both price and volume.

Roughly speaking.

  • Price above = strong
  • Price below = weak
  • Price oscillating around the VWAP = indecision

But what about if we zoom out a bit?

Can we use the VWAP on a higher time frame to help make better trading decisions?

I think we can… let’s explore.

ANCHORED VWAP

On most platforms, we can ‘anchor’ the VWAP to a specific point, a reference point that makes sense to start the VWAP calculations from.

For example:
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​QQQ (above): Anchored to 1st December (the first trading day of the month, a key date for many institutions). Price bounced off the anchored VWAP mid-December before Powell got involved…
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​Tesla: Anchored to the start of the month, the VWAP acted as support until it crumbled later in the year.

GBP/USD: Anchored to the most recent swing high, providing a useful perspective.

Gold: Anchored to a recent swing low, offering a strong buy zone during its move upward.

Tip on Gold: I used the futures contract instead of the CFD for better volume precision. CFD volume is okay, but nowhere near as accurate as futures, especially on smaller timeframes.
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Here’s a comparison: Futures on the left, CFD on the right.

WHERE TO ANCHOR VWAP?

Anchor the VWAP to a point you believe has meaning to the market participants.

Here are some ideas:

  • Earnings releases
  • Economic data (CPI, NFP, rate decisions)
  • Major news events
  • Market open (day, week, month)
  • Breakout candles
  • Swing highs or lows
  • Key pivot levels
  • Gap start (up or down)
  • Trendline breakpoints
  • Psychological levels (e.g., $100, 4,000)
  • All-time highs or lows
  • High-volume candles
  • Previous VWAP rejection points

You get the idea.

Like everything in trading, it’s all about experimenting. Try anchoring VWAP to points that resonate with your style and see how it works over time.

Happy VWAPing!

*I hosted a webinar called VWAP Trading Strategies which is worth a watch if you’re into VWAP.