Anchored Indicators 101

Automated Anchoring from TrendSpider can automatically anchor to special points configured by you (i.e. to the "Highest High") or, when in non-continuous mode, it anchors to the most recent point that is a fit, enabling you to flip through charts with ease.

For example, you can set the indicator to anchor to the highest-high, and on every chart that you open, it will automatically identify the appropriate point.
In this documentation, we will explore:

  • What is Anchoring
  • How to Add Anchored Indicators
  • How to Reconfigure Anchored Indicator
  • Backtesting with Anchored Indicators
  • Using Market Scanner with Anchored Indicators
  • Using Alerts with Anchored Indicators

Let’s get started 🚀

What is Anchoring

Most indicators, such as moving averages or Bollinger Bands®, are typically calculated using all of the candles on a chart. That said, some indicators, such as those with cumulative nature, like Volume Weighted Average Price, make more sense if they begin from a particular candle.

The starting candle is called the Anchoring Point. You can place an anchoring point on any candle, but in general, traders tend to use local minimums and maximums, as well as recent gaps, or the start of a time period (week or month).

TrendSpider provides the following anchored indicators:

How to Add Anchored Indicators

Step 1: Navigate to the top toolbar and click on the vertical ellipsis (⋮) adjoining Indicators button.

Click on the vertical ellipsis \(⋮\) adjoining Indicators button

Step 2: Search and select an anchored indicator from the list you wish to apply on the chart.

Search and select an anchored indicator

Step 3: Configure the properties as explained below while setting up the Anchored Indicators:

Anchor To: Select the criteria of anchoring the indicator. For example, you can anchor the indicator to time by selecting Year to Date. You can also anchor the indicator to Recent Gap or Highest volume or to Start of the month among many other options available.

Select the criteria of anchoring the indicator

Example of auto VWAPs (anchored Month to Date) on a 4-hour Boston Beer Company (SAM) chart.

Example of auto VWAPs \(anchored Month to Date\)

As mentioned already, we support multiple options for automated anchoring as illustrated in the table below:

Highest Volume Candle Uses Window parameter, (Please check the Note below)
Highest High Uses Window parameter
Lowest Low Uses Window parameter
Blue Raindrop Most Recent Blue Doji Raindrop™
Recent Gap Anchors to points based onGap Snake indicator
Day to date Since session open, today
Week to date Since open at the start of week
Month to date Since the monthly open
Quarter to date Since the start of each quarter
Year to date Since January 1

Note*: The window parameter might be slightly counter-intuitive: it serves as "The amount of candles a candle must dominate over in order to count as an appropriate anchor point". So in case, you do Window=5, then you'll be essentially anchoring to Williams Fractal points. If you do Window=20, then candle A will be recognized as the anchor point only in case no candle from 10 candles to the left and 10 candles to the right from A dominates over A.*

Line Stroke & Line Color: Define the thickness of the anchored indicator line and select the color you want this indicator line to have.

Line Stroke & Line Color

Price Source: Select the price source from the list.

Select the price source from the list

Continuous Mode: By default, the automated anchored indicator anchors to the most recent point that it finds to be a fit. However, you might enable the Continuous mode, which will make your indicator anchor to every appropriate point. This is useful for manual analysis and backtesting (explained in subsequent sections below).

enable the Continuous mode

Anchors: Enable the anchors to plot the anchor logo over the suitable points of the anchored indicator line based on the selection made for Anchor To. For example, if you have selected Anchoring- Month to date, then the anchor logo will be placed over the monthly open i.e. the first day of the month.

Enable the anchors to plot the anchor logo

Band: You can plot bands (a bundle of multiple levels) around the Anchored VWAP and define the levels accordingly. There are three types of bands available to use i.e. - Percentage, Std. deviation (also known as volatility bands), and VbP Ribbon (gets thicker around the areas where more volume has been traded).

plot bands around the Anchored VWAP

Example of VbP Ribbon around Auto VWAPs (anchored Year to Date) on a 4-hour Boston Beer Company (SAM) chart.

Example of VbP Ribbon around Auto VWAPs

Note*: You can also adjust the thickness and color of the multiple levels used while configuring the bands.*

Step 4: After making the configuration, click on the Apply button and the auto-anchored indicator will be graphed on the chart.

click on the Apply button

In this way, you can easily add different anchored indicators for the highest high, lowest low, recent gaps, and other key levels and the charts will automatically update to provide you with a sophisticated support and resistance picture without the need to anchor each point manually on every chart.

Note: The auto anchored Indicators are not removed when the symbol is changed. You can still find the anchored indicator plotted on the chart even while changing the symbol.

Example of multiple Auto VWAPs on a Weekly Apple (AAPL) chart.

Example of multiple Auto VWAPs on a Weekly Apple chart

How to Reconfigure Anchored Indicator

You can reconfigure the Anchored Indicator graphed on the chart to modify its properties or style or both. Simply click on the vertical ellipsis (⋮) of the indicator you want to reconfigure from the indicator list at the top left of the chart.

Reconfigure Anchored Indicator

As a result, you can reconfigure or modify the Line Stroke, Line Color, Price Source, Bands, and much more. Once done, then click on Apply button and the changes will be applied to the Anchored Indicator.

click on Apply button

Backtesting with Anchored Indicators

There's no point to backtesting Anchored indicators that are manually set since it's curve-fit to the corresponding chart and also won't provide you a lot of information to analyze. However, TrendSpider's automatically anchored indicators open the door to interesting possibilities.

For example, you can set the AVWAP to the first candle of a week and use it as a take-profit level or set the AVWAP to a recent gap and use it as a stop-loss level. You can then use these levels as part of your trading strategies and backtest them in the Strategy Tester.

In the snippet below, we are backtesting the AVWAP set to a recent gap and using it as a stop-loss level.

backtesting the AVWAP set to a recent gap and using it as a stop-loss level

For the purpose of backtesting, we recommend all AVWAPs to be in Continuous mode. The "Continuous" checkbox enables the Anchored indicator to identify all of the appropriate points on a chart and anchor to each of them on an ongoing basis. I.e., for AVWAP, just like the classic intraday VWAP "resets" when a new market session starts, the AVWAP in Continuous Mode will reset as soon as a new anchoring point emerges.

AVWAPs to be in Continuous mode

Click on the ‘Run’ button to perform the backtesting.

Click on the ‘Run’ button to perform the backtesting

Example of backtesting Auto AVWAP in Continuous mode:

backtesting Auto AVWAP in Continuous mode

Caveat: “Continuous Mode” is not available for Highest High, Lowest Low, and Highest Volume anchoring points because they use a concept of a "window" which is forward-looking and makes it useless when backtesting. i.e., if you have AVWAP for Highest High and Window=20, then there's no chance for it to catch a maximum at candle X until at least 10 candles pass after this candle (so we could really tell that this candle X has the highest high indeed).

Backtesting for Volume by Price (VbP) is not supported at the moment since VbP doesn't have Continuous Mode.

Using Market Scanner with Anchored Indicators

There's no point to scan using Anchored indicators that are manually set to a specific date since this date is guaranteed to be not that special for most symbols.

TrendSpider's automated anchoring ensures that Anchored indicators are set to meaningful points of interest across every chart that the Market Scanner is evaluating over time. For example, you can run a scan and find any time when the current price on the 5-minute chart is within the range of daily VWAP (anchored Quarterly) by 2% or more in the Russell 2000 Index.

Using Market Scanner with Anchored Indicators

Hit the Scan button to run the market scan on the specified conditions.

Hit the Scan button to run the market scan

Continuous Mode: We recommend scanning with non-Continuous Anchored indicators, as the opposite makes little to no sense.

Using Alerts with Anchored Indicators

For the purpose of creating alerts, you can use Anchored indicators which are either anchored manually or automatically — both ways will work and will make sense.

Simply Right-click on the anchored indicator and select Create alert at this line to create a simple dynamic alert. For more information on how to create alerts, please refer to the documentation- Create a Dynamic Price Alert

Using Alerts with Anchored Indicators

Caveat: Auto-anchored indicators are more likely to change the anchor point over time as new candles emerge and new appropriate anchoring points appear. For example, imagine that you set an alert on AVWAP anchored to Blue Raindrop. If your alerts live long enough, then it might come to the point where a new Blue Raindrop has emerged, and this AVWAP will catch up for the new anchoring point. The same can be observed when you will open your chart for sure.

Hence, while creating your alerts, you need to consider the fact that AVWAPs (except those anchored manually) do catch up for new anchoring points as they evolve.

Continuous Mode: We recommend creating your alerts on Anchored indicators in Continuous mode, if possible.

Tip: Alerts with Anchored Volume by Price (VbP) make sense for both automatic and manually anchored levels, depending on each individual trader's goals and objectives 💡

Aug 16, 2022

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