Anchored VWAP Pine Script: A Powerful Addition to Your TradingView Charts

Ever been in a trade where you're just sitting there wondering, "What's a fair price for this thing?" Yeah, me too. That's where Anchored VWAP comes in handy. Unlike regular VWAP that resets every trading session, this lets you anchor to any point you want - earnings releases, breakouts, market opens, whatever makes sense for your strategy.

What Is Anchored VWAP and Why Should You Care?

Regular VWAP (Volume Weighted Average Price) is like that reliable friend who shows up every day at the same time. It calculates the average price weighted by volume from market open to close, then resets the next day. Simple, predictable, but sometimes not exactly what you need.

Anchored VWAP is different. Think of it as VWAP with superpowers. Instead of automatically resetting at market open, you get to choose your starting point. Want to see the volume-weighted average price since that earnings announcement that moved the stock 20%? Anchor it there. Curious about the fair value since that major support level broke? You can do that too.

The math behind it is the same as regular VWAP - it's still calculating the cumulative volume-weighted price - but now you control when the calculation starts. This gives you a more relevant reference point for whatever event or level matters most to your trading strategy.

If you're new to creating custom indicators, I'd recommend checking out our Pine Script tutorial guide to get familiar with the basics before diving into more complex indicators like this one.

The Real-World Benefits of Anchored VWAP

Here's why I actually use this indicator in my daily trading:

Dynamic Support and Resistance

Unlike static horizontal lines, Anchored VWAP creates dynamic levels that evolve with price action and volume. When you anchor to a significant event, you're essentially asking: "What's been the fair value since this important thing happened?" The line that forms often acts as a magnet for price action.

Context-Specific Analysis

Regular VWAP treats all trading sessions equally. But markets don't work that way. Some sessions are way more important than others. By anchoring to specific events, you're focusing on the volume and price action that actually matters for your current analysis.

Better Entry and Exit Timing

I've found that price tends to respect Anchored VWAP levels more than arbitrary support and resistance lines. When price is trading above the anchored line, it often suggests the recent bias is bullish from that anchor point. Below it? Maybe the bears have been in control since that event.

Institutional Footprint Tracking

Big players often have reference prices from significant events. They might be using similar anchor points for their position management. By using Anchored VWAP, you're potentially seeing the same levels that larger traders are watching.

For a deeper understanding of how volume analysis can improve your trading, take a look at our comprehensive guide on Volume Weighted Average Price in Pine Script.

Building Your Anchored VWAP Indicator in Pine Script

Let me walk you through creating this indicator step by step. Don't worry if you're not a coding expert - I'll break it down so it makes sense.

Basic Anchored VWAP Script

Here's a clean, straightforward implementation:

//@version=5
indicator("Anchored VWAP", overlay=true)

// Input for anchor date and time
anchorTime = input.time(timestamp("01 Jan 2024 09:15 +0530"), title="Anchor Date/Time")

// Variables to track anchor point and cumulative values
var int anchorBarIndex = na
var float cumulativeTPV = 0.0  // Total Price * Volume
var float cumulativeVolume = 0.0

// Detect anchor point
if na(anchorBarIndex) and time >= anchorTime
    anchorBarIndex := bar_index

// Calculate anchored VWAP
if not na(anchorBarIndex) and bar_index >= anchorBarIndex
    typicalPrice = (high + low + close) / 3.0
    cumulativeTPV += typicalPrice * volume
    cumulativeVolume += volume
    anchoredVWAP = cumulativeTPV / cumulativeVolume
else
    anchoredVWAP = na

// Plot the line
plot(anchoredVWAP, color=color.blue, linewidth=2, title="Anchored VWAP")

Enhanced Version with Standard Deviation Bands

Once you get comfortable with the basic version, here's an enhanced script that includes deviation bands:

//@version=5
indicator("Enhanced Anchored VWAP", overlay=true)

// Inputs
anchorTime = input.time(timestamp("01 Jan 2024 09:15 +0530"), title="Anchor Date/Time")
stdDev1 = input.float(1.0, title="Standard Deviation 1", minval=0.1, maxval=5.0)
stdDev2 = input.float(2.0, title="Standard Deviation 2", minval=0.1, maxval=5.0)

// Variables
var int anchorBarIndex = na
var float sumTPV = 0.0
var float sumVolume = 0.0
var float sumTPVSquared = 0.0
var int barCount = 0

// Detect anchor point
if na(anchorBarIndex) and time >= anchorTime
    anchorBarIndex := bar_index

// Calculate values from anchor point
if not na(anchorBarIndex) and bar_index >= anchorBarIndex
    tp = (high + low + close) / 3.0
    sumTPV += tp * volume
    sumVolume += volume
    sumTPVSquared += tp * tp * volume
    barCount += 1
    
    // Calculate VWAP
    vwap = sumTPV / sumVolume
    
    // Calculate standard deviation
    variance = (sumTPVSquared / sumVolume) - (vwap * vwap)
    stdDeviation = math.sqrt(variance > 0 ? variance : 0)
    
    // Calculate bands
    upperBand1 = vwap + (stdDeviation * stdDev1)
    lowerBand1 = vwap - (stdDeviation * stdDev1)
    upperBand2 = vwap + (stdDeviation * stdDev2)
    lowerBand2 = vwap - (stdDeviation * stdDev2)
else
    vwap = na
    upperBand1 = na
    lowerBand1 = na
    upperBand2 = na
    lowerBand2 = na

// Plot everything
plot(vwap, color=color.blue, linewidth=2, title="Anchored VWAP")
plot(upperBand1, color=color.gray, title="Upper Band 1σ")
plot(lowerBand1, color=color.gray, title="Lower Band 1σ")
plot(upperBand2, color=color.red, title="Upper Band 2σ")
plot(lowerBand2, color=color.red, title="Lower Band 2σ")

// Fill between bands for better visualization
fill(plot(upperBand1), plot(lowerBand1), color=color.new(color.blue, 95))

Strategic Applications: How to Actually Trade with Anchored VWAP

Trend Direction and Strength

The simplest way to use Anchored VWAP is as a trend filter. When price is consistently trading above the anchored line, it suggests that buyers have been in control since your anchor point. When it's below, sellers have had the upper hand.

But here's the thing - don't just look at whether price is above or below the line. Pay attention to how price interacts with it. Does it bounce off the line like it's made of concrete? Or does it slice through like butter? The reaction tells you a lot about the strength of the level.

Entry and Exit Signals

I like to use Anchored VWAP in combination with other indicators for entry signals. For example:

• Pullback entries: When price pulls back to the Anchored VWAP in an uptrend, that can be a great spot to add to positions or enter new ones
• Breakout confirmation: If price has been chopping around the VWAP and finally breaks above (or below) with volume, that can signal the start of a new move
• Mean reversion: When price gets stretched too far from the VWAP (especially beyond the 2σ bands), it often snaps back

For more advanced entry and exit strategies, you might want to explore our guide on MACD crossover strategies in Pine Script, which can work well alongside VWAP analysis.

Risk Management Applications

One of my favorite uses for Anchored VWAP is position sizing and risk management. If I'm long and price is well above the anchored VWAP, I might size up or hold larger positions. But if price is struggling around the VWAP or below it, I'll typically keep positions smaller and be quicker to take profits.

The standard deviation bands are particularly useful here. Price spending time beyond the 2σ bands is relatively rare, so these can serve as natural profit-taking levels or areas to reduce position size.

Combining Anchored VWAP with Other Indicators

Anchored VWAP works great on its own, but it's even better when combined with other analysis tools. Here are some combinations I've found effective:

With Moving Averages

Combining Anchored VWAP with traditional moving averages gives you multiple perspectives on the same price action. You might anchor your VWAP to a significant event while also watching key moving averages like the 20 or 50-period EMA. When these align, it often creates stronger support or resistance zones.

If you want to learn more about implementing moving average strategies, check out our guide on Simple Moving Average implementation in Pine Script.

With Volume Analysis

Since VWAP is inherently volume-weighted, it pairs naturally with other volume-based indicators. Consider adding volume profile, On-Balance Volume, or other volume oscillators to get a more complete picture of volume dynamics around your anchor point.

Our Pine Script Volume guide covers various ways to incorporate volume analysis into your trading strategies.

With Momentum Oscillators

Momentum indicators like RSI or Stochastic can help you time entries and exits around your Anchored VWAP levels. For instance, if price is approaching the VWAP from below and RSI is showing oversold conditions, that might be a higher-probability long setup.

Common Mistakes and How to Avoid Them

Mistake #1: Using Too Many Anchor Points

I see traders who anchor VWAP to every minor swing high and low. That's like having ten different speedometers in your car - just confusing. Stick to anchoring at truly significant events: earnings, major news, clear breakout points, or session opens.

Mistake #2: Ignoring the Context

Anchored VWAP isn't magic. If you anchor to a random point with no significance, the resulting line won't have much predictive value. Always ask yourself: "Why would other traders care about this anchor point?"

Mistake #3: Over-Relying on the Indicator

Like any tool, Anchored VWAP works best as part of a broader analysis framework. Don't make trades based solely on VWAP interactions. Consider market structure, volume, momentum, and overall market conditions too.

Mistake #4: Not Adjusting for Different Timeframes

What works on a 5-minute chart might not work on a daily chart. The significance of your anchor point and the relevance of the VWAP line can change dramatically based on your timeframe. Always consider the time horizon of your analysis.

Advanced Tips for Professional Implementation

Dynamic Anchoring

Instead of manually setting anchor points, you can create scripts that automatically anchor to significant events like gap opens, volume spikes, or volatility expansions. This removes the subjectivity but requires more complex logic.

Multiple Timeframe Analysis

Consider using Anchored VWAP on multiple timeframes simultaneously. You might have a longer-term anchor (maybe from quarterly earnings) on your daily chart and a shorter-term anchor (from the morning gap) on your intraday charts.

Alert Integration

Set up alerts when price crosses your Anchored VWAP or reaches the standard deviation bands. This lets you stay aware of key levels without staring at charts all day.

Final Thoughts: Making Anchored VWAP Work for You

Anchored VWAP isn't just another indicator to clutter your charts. When used thoughtfully, it provides context that regular technical analysis often misses. It answers the question: "What's been fair value since this important thing happened?"

The key is selecting meaningful anchor points and understanding that the indicator is only as good as the significance of your chosen anchor. Don't anchor to random points expecting magic results.

Start simple with the basic implementation, get comfortable with how price interacts with the line, then gradually add complexity with standard deviation bands and combinations with other indicators.

Remember, successful trading isn't about finding the perfect indicator - it's about understanding market dynamics and using tools like Anchored VWAP to gain an edge in that understanding.

If you're serious about developing your Pine Script skills beyond just indicators, our Best Pine Script course guide can help you build a solid foundation for creating more sophisticated trading tools.

The market is constantly evolving, and tools like Anchored VWAP help you evolve with it. Give it a try, but remember - no indicator replaces good judgment and solid risk management. It's just another piece of the puzzle in building a complete trading approach.