Anchored VWAP (AVWAP)¶

OVERVIEW¶

Anchored VWAP (AVWAP) computes the Volume Weighted Average Price starting from a user-selected price event rather than the daily session open. By anchoring to a meaningful moment — an earnings release, a breakout pivot, an IPO date, or a major swing high or low — traders produce a continuous cost-basis line representing the average price paid by every participant who bought or sold at or after that event.

Note

AVWAP answers one precise question: where are participants who entered since this anchor point at breakeven?

FORMULA¶

AVWAP uses the same core calculation as standard VWAP, but cumulative sums begin at the anchor candle and accumulate forward through the present bar:

AVWAP(t) = Σᵢ₌anchor^t (Typical Priceᵢ × Volumeᵢ) / Σᵢ₌anchor^t Volumeᵢ

Typical Price = (High + Low + Close) / 3

Each new bar updates the running cumulative sum. The line initializes at the anchor candle's Typical Price and drifts based on subsequent volume-weighted price activity.

ANCHOR POINTS¶

Anchor Type	What It Measures
Earnings release date	Average cost of all post-earnings participants; breakeven for reactive buyers and sellers
IPO or spin-off date	Average cost basis of all public-market buyers since listing
Quarterly open	Matches institutional performance benchmarks; approximates fund entry prices
Gap open after a catalyst	Measures whether price has accepted or rejected value at the gap level
Major swing high	Identifies where distribution began
Major swing low	Identifies where accumulation began

Tip

Stocks frequently return to their IPO-date AVWAP on their first major post-listing correction. This level often acts as significant support or resistance.

HOW TO USE¶

Post-Earnings Mean Reversion¶

Stocks that gap sharply on earnings frequently re-test their post-event AVWAP within 3–6 weeks. Use the AVWAP as:

First logical target for mean-reversion longs on stocks that gapped down
First resistance level for recovery rallies on stocks that gapped up and failed

Trend Health Confirmation¶

Price consistently above an upward-sloping AVWAP anchored to a key breakout → trend intact
A close below the AVWAP → bias shifts, potential trend failure flagged

Multiple AVWAP Stacking¶

Run two AVWAPs simultaneously to define a dynamic value zone:

Condition	Interpretation
One anchor at major swing low, one at recent swing high	Defines equilibrium range between the two lines
Price trading between both AVWAPs	Market in balance; no directional edge
Decisive close through either line	Directional bias shifts toward that anchor's participants

Institutional Cost Basis Estimation¶

Anchor to the first day of a calendar quarter to approximate where large systematic funds entered. Price approaching that level from above often finds support as funds defend their cost basis.

WORKED EXAMPLE¶

TSLA gaps down to open at $242 following Q1 2025 earnings on April 22. An AVWAP anchored to that morning's open accumulates every TSLA share traded from $242 forward, weighted by volume.

Three weeks later TSLA approaches the resulting $255 AVWAP from below:

Participants who bought the gap-down at $242–$248 are in profit and may take partial exits
Participants who chased the bounce to $258–$262 are underwater and become natural sellers at their breakeven

TSLA stalls at $255 and reverses lower over the next three sessions, confirming AVWAP as resistance. Traders who entered short at $255 with a stop above $260 captured a clean 4% move back toward $244.

LIMITATIONS¶