Module 4 · Lesson 9 of 12 · Volume and indicators · About 5 minutes
Anchored VWAP: Averaging From a Chosen Starting Point
On this page
Before you read: What Is VWAP? Session vs Anchored VWAP Explained
What you will learn
- How anchored VWAP differs from session VWAP.
- Why the anchor point is a choice, and how different anchors give different lines.
- What VWAP bands show, and what any VWAP line cannot tell you.
How is anchored VWAP different?
If session VWAP restarts every morning, what would happen if you chose your own start?
VWAP is the average price weighted by volume. Session VWAP starts fresh each session. Anchored VWAP uses the same formula but starts at a point the reader chooses, such as a major high or low, a gap, an earnings release or the start of a year. From that anchor forward, the line shows the volume-weighted average price of all trading since.
Anchored VWAP diagram
Illustrative diagram constructed for teaching. Not real market data.
The diagram shows a fictional price path with one anchored VWAP starting at a swing low and another starting at a later gap. The two lines sit at different levels for the rest of the chart. All values are made up.
Why does the anchor matter?
Two readers anchor at different lows. Will their lines agree?
Each anchor answers a different question: “What is the average price paid since this event?” Anchoring at a swing low gives one line; anchoring at the earnings date a week later gives another. Neither is more correct. Readers often describe price above an anchored line as trading above the average since that event, and below it as the reverse. That is arithmetic about the past.
What are VWAP bands?
How far does price usually sit from the average?
Many platforms draw bands at one or more standard deviations of price around VWAP. Platforms differ in exactly how they compute that deviation, so check your platform’s documentation. Wide bands describe a spread-out distribution of trade since the anchor; narrow bands describe trade clustered near the average. Some platforms use percentage bands instead. The bands describe dispersion. They are not limits that price respects.
Where does anchored VWAP fall short?
What does the line know about the market that the chart does not?
Anchored VWAP is calculated from the same price and volume data as the chart. It adds a summary, not new information. Different data feeds and session settings, such as whether overnight trading is included, change the line. It also flattens over long periods, since each new bar is a smaller share of the total.
What this does not tell you about anchored VWAP
- Which anchor to use. Each one answers a different question.
- Whether price will return to, hold above or stay below any line.
- Who traded since the anchor, or at what cost to any one participant.
- Nothing here suggests buying, selling or holding at any VWAP line.
Method in Practice: a reclaim, and a failed one
Fictional example. John, Harbor Index futures, the prices, times, costs and results are all invented for teaching. This shows how a written plan can be built and tested. It is not a recommendation, and nothing here says how often this idea works.
Try it on a real chart. Test this idea yourself on past sessions with bar replay. Keep your own count, including the days with no trade.
The idea. Anchored VWAP starts from a point you choose, and each anchor answers a different question (this lesson). John anchors from the low of a report-day selloff last week. Price has stayed below that line since. His plan needs price to reclaim it: close above it, then hold above it for a full period.
John's plan
- Setup
- VWAP anchored at last week's report-day low. Price below it for four sessions
- Enter if
- a 30-minute period closes above the anchored VWAP, and the next period's low stays above it. Buy.
- Wrong if
- a 30-minute period closes more than 0.10 below the anchored VWAP
- Manage
- take half at entry + 0.60, the rest at entry + 1.20 or by 14:30
- Risk
- $150 maximum, costs included
Three outcomes
-
Worked: the reclaim held → +$145
-
Failed: reclaimed, then lost again → −$114, inside the limit
-
No trade: one close above, but the next period dipped back below → $0
Show the full replays
| Item | Plan |
|---|---|
| Context | VWAP anchored at the report-day low, using the same session settings as the chart |
| Entry condition | A 30-minute close above the anchored VWAP, then the next period's low stays above it. Buy 2 at market after that next period closes |
| Wrong if | A 30-minute period closes more than 0.10 below the anchored VWAP. Exit at market after that close |
| Management | Take profit on half at entry + 0.60 (limit) and move the exit for the rest to the entry price (stop). Rest at entry + 1.20 (limit). Time limit 14:30 CT |
| Risk cap and size | $150. Exiting about 0.10 under the line is planned to cost about $55 per contract, so 2 contracts |
| Not trading if | Scheduled major release within the hour, or no setup by 12:00 CT |
Replay A: worked
| Time (CT) | What happened | John |
|---|---|---|
| 09:00–09:30 | Closes 100.55. Anchored VWAP 100.40 | First close above |
| 09:30–10:00 | Low 100.45, closes 100.70 | Held above: buys 2 at market, filled 100.75 |
| 10:00–11:20 | Trades 101.35 at 11:20 | Sells 1 at 101.35 (limit). Exit for the other moves to 100.75 |
| 11:20–14:30 | High 101.85, never 101.95, never back to 100.75 | At 14:30 sells the last 1 at market: price 101.75, filled 101.70 |
Result after costs: +0.60 point = +$60, +0.95 point = +$95, commissions −$10. Net +$145. Journal: "Reclaimed and held. The time limit closed the rest."
Replay B: failed
| Time (CT) | What happened | John |
|---|---|---|
| 09:30–10:00 | Closes 100.52. Anchored VWAP 100.40 | First close above |
| 10:00–10:30 | Low 100.44, closes 100.67 | Held: buys 2 at market, filled 100.72 |
| 10:30–11:00 | Falls, closes 100.25 | More than 0.10 below the line: sells 2 at market, filled 100.20 |
| 11:00–15:00 | Stays below the line | Done for the idea |
Result after costs: 2 × −0.52 point = −$104, commissions −$10. Net −$114. Journal: "A clean reclaim, then lost within the hour. The line didn't hold anything."
Replay C: no trade
| Time (CT) | What happened | John |
|---|---|---|
| 09:30–10:00 | Closes 100.50. Anchored VWAP 100.40 | First close above |
| 10:00–10:30 | Dips to 100.35, below the line | Not held: no trade |
| 10:30–12:00 | Chops 100.20–100.70, no new close-and-hold | No setup. 12:00 cutoff |
Result: $0. Journal: "One close above isn't a reclaim by my rule. The next period has to hold."
Test it yourself
- Write your anchor rule before looking at where the line ends up. Otherwise you'll pick the anchor that fits.
- Replay every first close above the line, with and without the "next period holds" condition.
- Try a second anchor and compare. If it changes everything, note which question each anchor answers.
Where it breaks
- Anchored VWAP is a summary of the same price and volume data. It adds no new information.
- A reclaim can fail (the failed replay).
- A different anchor gives a different line.
Calculators: position sizerisk/rewardexpectancy
Reflection question: Why did you choose your anchor, and did you write that down before you saw the line?
Check yourself
- Why do two anchored VWAP lines on the same chart usually sit at different prices? Hint: what trading does each one include?
- Why does an anchored VWAP from a year ago move very little each day? Hint: how big is one day’s volume compared with the total?
- What do wide VWAP bands describe? Hint: dispersion of trade.
Reflect on your own process
- Does your plan say how you choose an anchor point before looking at what price did afterward?
- When your notes mention an anchored VWAP, do they record the anchor date and why you chose it?
- How would you check whether your platform's VWAP bands use standard deviation or percentage?
- Why did you choose your anchor, and did you write that down before you saw the line?