What is an Anchored VWAP?

Anchored VWAP calculates volume-weighted average price from a user-defined point, helping traders identify trends, support/resistance, and market sentiment over custom timeframes.

Aug 02, 2025 at 12:57 am

Understanding the Concept of Anchored VWAP

An Anchored VWAP (Volume Weighted Average Price) is a specialized version of the traditional VWAP that allows traders to calculate the average price of an asset weighted by volume, starting from a user-defined point in time rather than the beginning of a trading session. Unlike standard VWAP, which resets at the start of each trading day, Anchored VWAP remains fixed to a specific anchor point—such as the start of a trend, a major news event, or a significant price swing—enabling traders to analyze price behavior over custom timeframes. This flexibility makes it a powerful tool for identifying long-term support and resistance levels, assessing trend strength, and evaluating whether price is trading above or below a historically significant average.

The formula for Anchored VWAP is identical to standard VWAP:
VWAP = Σ (Price × Volume) / Σ Volume,

where the sum is calculated from the chosen anchor point to the current bar. The key difference lies in the starting point, which is manually selected. Traders often use Anchored VWAP on daily, weekly, or even intraday charts to align the indicator with meaningful market events.

Applications of Anchored VWAP in Trading Strategies

Traders leverage Anchored VWAP to gain insights into market structure and participant behavior over extended periods. When price consistently trades above the Anchored VWAP, it suggests bullish sentiment and that buyers are in control from the anchor point onward. Conversely, if price remains below the Anchored VWAP, it indicates sustained selling pressure. This dynamic helps traders identify the dominant market force during a selected period.

For example, a swing trader might set the anchor at the low of a bullish reversal candle following a prolonged downtrend. From that point, the Anchored VWAP acts as a dynamic support level. If price pulls back to touch or slightly dip below the line before resuming upward, it may signal a healthy consolidation. Institutional traders often use this technique to monitor whether price is respecting key volume-based averages established at pivotal moments.

Additionally, Anchored VWAP can be combined with other tools like moving averages or RSI to confirm trend validity. A rising Anchored VWAP alongside increasing volume confirms accumulation, while a flat or declining line amid low volume may suggest range-bound conditions.

How to Set Up Anchored VWAP on Trading Platforms

Most advanced trading platforms such as TradingView, ThinkorSwim, and MetaTrader with custom scripts support Anchored VWAP. The process involves selecting a starting point and applying a script that calculates VWAP from that point forward.

To set it up on TradingView:

• Open the chart of the desired cryptocurrency (e.g., BTC/USD).
• Click on the "Indicators" button located at the top of the chart.
• Search for "Anchored VWAP" in the public library or use a Pine Script.
• Once added, a cursor will appear allowing you to click on a specific bar to set the anchor.
• After clicking, the Anchored VWAP line will render from that bar to the present.
• Customize the line color, thickness, and style via the settings menu.

For ThinkorSwim:

• Navigate to the Charts tab.
• Select Studies > Add Study > Custom > VWAP Anchored.
• Use the "Anchor to" option to select a date, event, or technical condition.
• Adjust the aggregation period (e.g., 1-minute, 1-day) to match your analysis needs.
• Confirm the study is applied from the chosen starting point.

Ensure the volume data is accurate, especially in cryptocurrency markets where exchange-specific volume can vary. Using aggregated or reputable exchange data enhances reliability.

Interpreting Anchored VWAP in Cryptocurrency Markets

In the volatile world of cryptocurrencies, Anchored VWAP offers a data-driven lens to evaluate long-term trends. For instance, anchoring VWAP to the price level following a major exchange hack or regulatory announcement allows traders to assess recovery momentum. If Bitcoin climbs above its Anchored VWAP after such an event and holds, it signals resilience and potential institutional re-entry.

Another use case involves anchoring to the start of a bull run—say, December 2022 for Bitcoin. From that point, the Anchored VWAP serves as a benchmark for fair value. Deviations above or below this line can highlight overbought or oversold conditions relative to that cycle. Traders watch for price rejections at the Anchored VWAP line, which may indicate reversals, or smooth transitions through it, suggesting trend continuation.

Volume spikes near the Anchored VWAP are particularly telling. A sharp increase in volume as price touches the line suggests strong interest at that average price, possibly marking a turning point. Conversely, low-volume tests imply weak engagement and lesser significance.

Common Mistakes When Using Anchored VWAP

One frequent error is anchoring to arbitrary or insignificant price points, such as random candles without context. This leads to misleading interpretations. Always anchor to high-impact events like breakouts, major support/resistance breaches, or macroeconomic announcements.

Another mistake is ignoring the timeframe mismatch. Applying a daily Anchored VWAP on a 5-minute chart without context can create noise. Align the anchor period with your trading horizon—long-term investors should use daily or weekly anchors, while scalpers may benefit from intraday event-based anchors.

Failure to adjust for exchange-specific volume discrepancies in crypto markets is also problematic. Some platforms report inflated or delayed volume. Cross-referencing with on-chain data or multi-exchange aggregates improves accuracy.

Lastly, over-reliance on Anchored VWAP without confirmation from price action or volume profile can lead to false signals. It should complement, not replace, comprehensive technical analysis.

Frequently Asked Questions

Can Anchored VWAP be used on all cryptocurrencies?

Yes, Anchored VWAP is applicable to any cryptocurrency with reliable volume data. Major coins like Bitcoin (BTC) and Ethereum (ETH) offer consistent volume, making the indicator more accurate. For low-cap altcoins with sparse or manipulated volume, results may be less trustworthy.

How do I choose the right anchor point?

Select points tied to significant market events—such as the start of a new trend, a major news release, or a breakout from consolidation. Use horizontal support/resistance levels, volume spikes, or candlestick patterns like engulfing bars as visual cues.

Does Anchored VWAP repaint?

No, once the anchor is set, the Anchored VWAP recalculates forward using historical data and does not change past values. However, the line updates with each new bar as volume and price evolve, which is normal and not considered repainting.

Can I use multiple Anchored VWAPs on the same chart?

Yes, most platforms allow multiple instances. Traders often apply separate lines for different events—e.g., one anchored to a bull run start and another to a correction low. Use distinct colors to differentiate them and avoid confusion.