What is Anchored VWAP?
Anchored VWAP displays the volume-weighted average price for a specific time period, starting from a user-selected point. In other words, Anchored VWAP shows the price of an asset adjusted for its volume starting from any point chosen on the chart. This is a powerful tool because it takes into account the number of shares traded at each price level and presents it as a smooth line.
How to apply AVWAP to your chart
1. Select Anchored VWAP from the drawing tools list on the chart’s left-side panel, as shown below.
2. Click on the chart to select the point from which you’d like to start your calculation. The volume-weighted average price curve will be displayed on the chart as pictured below.
In addition, you can change the color and thickness of the Anchored VWAP by double-clicking on the line and selecting the appropriate parameters in Settings.
A little historical background
The Anchored VWAP tool was developed by the late physicist and technical analyst, Paul Levine, while working on the Market Interpretation/Data Analysis system (MIDAS) between the years 1995 and 1997. Levine developed the methodology of professional trader, Kevin Haggerty, who used volume-weighted average price curves to determine the direction of a position in the 80s. Today, Brian Shannon, Zach Hurwitz, and the CMT Association continue to push the story of Anchored VWAP and have done a fantastic job bringing it into the mainstream.