Description
Anchored VWAP is a variation of the VWAP indicator that uses a specific time and price level as an anchor point, or starting point, rather than the beginning of the current session or trading day. The anchor point can be a significant high or low point in the price action, a pivot level, or any other point of interest. The purpose of the Anchored VWAP is to provide a more targeted view of the market, allowing traders to identify specific price levels that are relevant to their analysis. AVWAP allows traders to see what the average price traders are holding an asset over a given period of time.
Input Parameters
- Anchor to - determines the location of where you will automatically anchor the vwap.
- Bands - allows you to add Std. Dev, Percentage, or VbP Ribbon bands to the indicator.
- Price Source - price data used in calculation.
Use Cases
1. Support or Resistance level
When the price of a stock is above the Anchored VWAP, it can act as a support level, and when the price is below the Anchored VWAP, it can act as a resistance level. This means that traders can use Anchored VWAP as a reference point for potential support and resistance levels. When the price of the stock approaches the Anchored VWAP, traders may look for a bounce or a breakout, depending on the direction of the trend.
2. Use it to identify breakouts or breakdowns
Breakouts and breakdowns occur when the price of a stock moves above or below the Anchored VWAP, respectively. These moves can be used as signals to enter or exit trades. For example, a trader may look for a breakout above the Anchored VWAP as a signal to enter a long position, or a breakdown below the Anchored VWAP as a signal to exit a short position.
3. Use multiple Anchored VWAPs
Traders can use multiple Anchored VWAPs to gain a more comprehensive view of the stock’s price movement. For example, a trader may anchor VWAP to different points in time, such as the high or low of the day, week, or month, to identify potential support or resistance levels. The trader can then use these levels to make more informed trading decisions. Multiple Anchored VWAPs can also be used to confirm each other, creating stronger signals.
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