Anchored VWAP

Anchored VWAP lets you ask a specific question. What is the average price paid since the earnings gap, since the swing low, or since the breakout bar? Participants who entered at that event are, on average, in profit when price is above the anchor and in loss when it is below. That is why the line often acts as support or resistance. It is still an average of typical price times volume, not a survey of actual account holders.

The anchor is a judgement. A meaningful anchor is a bar the market will remember: a high, a low, a gap, a breakout, a news bar. Anchoring to a random Tuesday produces a line with no constituency. Many traders plot two anchors, one from the swing high and one from the swing low, and watch the band between them. Price returning to an anchor from above is a test of the buyers who showed up at the event.

Use an anchor from the impulse low in an uptrend. Pullbacks that hold the anchored VWAP say the average buyer since that low is being defended. Use an anchor from a blow-off high to see the average price of the distribution. Do not stack ten anchors. Two events are a framework. Ten are a scribble.

Moving the anchor until the line touches the latest low and calling it confluence. The line will agree with you if you edit the start. Also forgetting that a split, a bad tick, or a feed reset at the anchor corrupts every later value.

Like VWAP, the bar-based version approximates prints. And the "average participant" story fails when the anchor volume was a single auction or a one-off block that is not representative of who is still in the trade.