: It reveals the average price of all market participants since a specific event.
Look for a low-volume pullback to the line or a strong breakout away from a convergence zone.
Disclaimer: This guide is for educational purposes. Trading involves risk. Always backtest strategies on historical data before using real capital.
Placing an anchor at a major swing low reveals the average cost basis of the buyers who stepped in to defend the asset. If the price returns to this line and holds, it proves those buyers are still protecting their positions. Conversely, anchoring to a major swing high shows the average cost basis of short sellers and trapped longs. 2. Earnings Announcements and Gap Days
: For newer stocks, anchoring to the very first day of public trading provides the ultimate long-term baseline for market sentiment. maximum trading gains with anchored vwap pdf
For any trader serious about implementing these concepts, the definitive resource is Brian Shannon's Maximum Trading Gains with Anchored VWAP: The Perfect Combination of Price, Time & Volume . This book is the result of decades of research and application by Shannon, who has been using AVWAP since the early 2000s and has been instrumental in getting this analysis tool on a dozen charting platforms.
The key insight is that . It is not a static horizontal level like a traditional support line, but a dynamic level that adjusts based on new volume and price information. This dynamism makes it remarkably resilient and self‑correcting. When price deviates too far from the volume‑weighted average, mean reversion forces often pull it back toward the AVWAP, creating profitable counter‑trend opportunities for nimble traders.
By reading this guide, you will learn how to transform a simple volume-weighted line into a dynamic, multi-timeframe decision-making tool used by institutional traders and hedge funds.
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Apply the AVWAP tool to the specific candle of that event.
: In a strong uptrend, wait for the price to pull back to the AVWAP line. Since this represents the "fair value" for buyers since the trend started, it often acts as dynamic support for a high-conviction entry.
Use standard deviation bands (if available on your platform) or prior horizontal resistance levels as logical targets for taking profits.
Maximizing gains requires minimizing losses. AVWAP provides an objective, rule-based framework for managing risk. Trading involves risk
retains the same fundamental calculation but allows the trader to define the starting point (the "anchor"). The calculation then runs cumulatively from that specific bar forward, without resetting at the end of the day. The only difference lies in which bars are included in the calculations. This flexibility means AVWAP can cover several days, weeks, or even months, depending on the significance of the chosen anchor event.
The most common and effective anchor points are significant swing highs and swing lows. Anchor to a major swing low to track the start of an uptrend. As price advances, the upward‑sloping AVWAP line acts as dynamic support. Conversely, anchor to a major swing high to track the start of a downtrend, with the downward‑sloping AVWAP acting as dynamic resistance. Anchoring the top to a major swing high creates dynamic resistance from that pivot, while anchoring the bottom to a major swing low creates dynamic support from that pivot.
When a company reports stellar earnings, the stock often gaps up on massive volume.
While a free PDF of the complete book is not legitimately available and is protected by copyright, you can find excerpts and limited previews on Google Books. The full resource is available for purchase in paperback and for Kindle, and represents a valuable investment for any trader looking to move beyond basic technical analysis.