Anchored VWAP (Volume Weighted Average Price) is a tool many traders use to identify potential support and resistance levels based on the average price of an asset, weighted by volume, over a specified period. Unlike traditional VWAP, which starts its calculation from the beginning of the day, Anchored VWAP allows traders to select a specific point in time to begin the calculation. This feature makes it particularly useful for analyzing significant events, such as earnings announcements or the aftermath of large price movements.
Traders capture the sentiment around these events by anchoring the VWAP to the start of the move, thus gaining insight into how the market has been valuing the asset since that point in time. This could be particularly helpful in identifying points where a price correction is likely or in deciding entry and exit points. When prices are above the Anchored VWAP, it indicates a potential bullish bias, while prices below it might suggest bearish sentiment.
Overall, Anchored VWAP can provide a more customized and relevant perspective compared to its traditional counterpart, especially when focusing on specific market conditions or events. Many who have used Anchored VWAP find it adds an extra layer of clarity to their analysis, contributing effectively to their strategic decision-making process.
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