Anchored VWAP (Volume Weighted Average Price) is a technical indicator used in trading that calculates the average price at which an asset has traded during a specified period, taking into account both price and volume. Unlike traditional VWAP, anchored VWAP is calculated using a specific starting point in time, which is typically a significant event or price level.
Anchored VWAP can be used to identify support and resistance levels, as well as to determine the fair value of an asset. By anchoring the VWAP to a specific point in time, traders can gain insight into the supply and demand dynamics at play at that time, which can inform their trading decisions.
For example, if a trader wants to analyze the price action of a stock since a significant event such as an earnings announcement, they can anchor the VWAP to that point in time and use it as a reference point for assessing the stock's performance. If the stock's price is trading above the anchored VWAP, it may suggest that the stock is in a bullish trend, while a price trading below the anchored VWAP may indicate a bearish trend.
Anchored VWAP is one of many technical indicators that traders use to make informed trading decisions. It is important to note that no single indicator can provide a definitive signal for trading and that traders often use a combination of indicators to gain a more complete understanding of market dynamics.
How I use VWAP in my trading strategy:
I plot the daily, weekly, monthly, and yearly VWAPs and look for stocks where the current stock price is trading above all. That eliminates any near-term resistance. Since I am a short-term trader and look for the strongest stocks this approach works well for me. I am attaching a free version of the VWAP. In the gear, you will have to choose the start of the anchored date.
The ticker $LIN on 2/24/23 crossed above all the anchored VWAPs and subsequent to that the UTS trading strategy triggered a buy signal leading to great profits on a day when the overall market was down. You can also look for stocks where the close is below all the anchored VWAPs for short opportunities.
Free version of Anchored VWAP: http://tos.mx/xbSVNnv