Anchored VWAP

The Anchored VWAP indicator calculates a volume-weighted average price starting from a specific, user-defined point in time, providing a dynamic benchmark for fair value and trend direction. This tool is particularly useful for identifying support and resistance levels anchored to significant market events, such as earnings reports, session opens, or major trend reversals.

Usage

The Usage section describes how the script can be used to navigate market trends and volatility. By anchoring the calculation to a specific candle, traders can see how the average price paid by market participants has evolved since that event.

• Trend Confirmation: When the current price remains above the AVWAP line, the market is generally considered to be in a bullish trend relative to the anchor point. Conversely, price trading below the AVWAP suggests a bearish sentiment.
• Support and Resistance: The AVWAP line often acts as a primary dynamic support or resistance level. Traders look for bounces or rejections when price approaches this line.
• Mean Reversion: The three standard deviation bands help identify overextended price action. Reaching the 3rd deviation band often indicates an extreme overbought or oversold condition, suggesting a potential pullback toward the mean (AVWAP).
• Volatility Assessment: The expansion or contraction of the standard deviation bands provides a visual representation of market volatility since the anchor point.

Details

The indicator uses a cumulative sum of price multiplied by volume, divided by the cumulative volume starting strictly from the selected "Anchor Time." Unlike a standard VWAP which resets at fixed intervals (like daily or weekly), this version maintains its calculation from the chosen start point indefinitely.

The price source for the calculation is defined as (Open + High + Low + Close) / 4 (OHLC4), which provides a more comprehensive view of each candle's price action compared to using only the closing price. The standard deviation bands are calculated by measuring the price dispersion around the AVWAP, providing a statistical context for price movements.

Settings

• Anchor Time: This setting allows the user to select the exact date and time where the VWAP calculation begins. In TradingView, this can be set via the input field or by clicking the desired candle on the chart if "confirm = true" is active.

FAQ

How do I use the Anchored VWAP?

Select the indicator from your library and choose a significant starting point on your chart, such as a swing high, swing low, or a specific news event, to begin the volume-weighted calculation.

What do the different bands represent?

The central line is the AVWAP. The three pairs of dashed lines represent the 1st, 2nd, and 3rd standard deviations. Higher deviations indicate more extreme price movement away from the average.

How can I access this tool?

You can get access on the LuxAlgo Library for charting platforms like TradingView, MetaTrader (MT4/MT5), and NinjaTrader for free.