Anchored VWAP

A volume-weighted average price calculated from a chosen anchor point — a high, low, or event — rather than resetting daily, marking the average price paid by everyone who has traded since that moment.

Standard VWAP resets each session; anchored VWAP instead begins its cumulative volume-weighted average from a user-selected bar — a swing high or low, an earnings date, a breakout, or any meaningful event. From that anchor forward it sums price times volume and divides by cumulative volume, producing the true average cost basis of every share traded since the chosen origin. Many implementations add one- and two-sigma bands around it to show the dispersion of that cost basis.

The anchored VWAP line represents the break-even price for participants who entered at the anchor. When price trades above it, those buyers are collectively in profit and the level tends to act as support; below it, they are underwater and the level becomes resistance as trapped longs sell into rallies back to break-even. Anchoring to a major pivot turns VWAP into a high-conviction line that institutions and algorithms genuinely reference, which makes it partly self-fulfilling.

Anchored VWAP is among the more reliable dynamic levels precisely because it is rooted in real transacted volume rather than price alone — it answers "what did people actually pay," which a moving average cannot. Its reliability depends entirely on choosing a meaningful anchor; an arbitrary origin yields a meaningless line. On daily data it is an approximation (each bar carries a single volume figure), so it is sharper on intraday data. Versus a plain moving average it is more grounded but less smooth, and it only works on instruments with trustworthy volume — limiting its use in some FX and over-the-counter markets.

This definition is for informational and educational purposes only. Nothing on Finance Compass constitutes financial, investment, or trading advice. Always conduct your own research and consult a qualified professional before making financial decisions.