Transcription
Does the anchored VWOP indicator help or hurt traders? What does the anchor do and how does it compare to regular VWAP?
I'm Lance Brightstein, 8 figureure P&L per year trader with over $100 million in verified profits and mentor to the world's top traders. Here's a deep dive into how to use Anchored VWOP and how I specifically apply it to my trading.
Anchored VWOP is a tool that can help every trader on every time frame make better time decisions and make more profit if you know how to use it. Popularized by longtime industry veteran Brian Shannon of Alpha Trends, this indicator has only grown in use over time. Crazily enough, I still remember being in college when Brian's first book came out, Technical Analysis Using Multiple Time Frames. So, that makes me feel old, but sorry, Brian. I guess you're really old. That book was incredibly useful, and aligning multiple time frames is an essential part of my success in trading. I'll go down that rabbit hole another time in another video, so subscribe. But for now, let's explore what Anchored VWAP is, why it might work, some chart examples, as well as how I recommend traders utilize this tool. Brian argues that anchored VWOP can provide an assortment of benefits that includes identifying opportunities, timing entries, better recognizing price action, and more. Well, Brian, I think I'll be the judge of that.
Before we talk about anchored VWOP, let's quickly cover standard VWOP so you fully understand how the benefits and use cases differ. Standard VWOP is the volume weighted average price, which is a lot of words to pretty much say it is the average cost basis of the market for the day. Let's break it down using a super simple example. Let's say 10,000 shares were traded at $2. 5,000 shares were traded at $2.50. and 20,000 shares were traded at $3. To calculate VWOP, we would multiply each of the shares traded by the price they were traded at. Add them together, then divide by the total number of shares. When we do that, we get a VWOP of $2.64.
In such a simple example, VWOP is unnecessary because we can easily tell which buyers are in the money and which are out of the money. However, in the actual stock market where thousands of transactions per day are happening in each stock, VWAP allows you to get a rough sense of whether those buyers are currently in the money or out of the money. Even more importantly, VWAP is a critical metric used by institutional traders running algorithms. Execution traders at hedge funds or major banks try to execute their trades as favorably as possible versus VWAP while trying to minimize market impact and slippage. As a result, traders track VWAP as a form of trend because it's one of the key inputs for these institutional algorithms. In other words, if we are trading below VWOP, it is a sign that sellers are in control and that the average buyer that day is out of the money. Vice versa, if we are trading above VWOP, it is a sign that the buyers are in control and that the average buyer that day is in the money. Additionally, you should know that trading around VWOP is a sign of market equilibrium. But here's the limitation. Standard VWOP resets every day. If something important happens like earnings or a major breakout, you lose the continuity and that's where anchored VWOP comes in.
Anchored VWOP is just VWOP. But instead of starting from the beginning of the trading day, you pick the anchor point. The anchor point could be the low of a panic sell-off, an episodic pivot, Allah Christian Kalamagi, the day a trend started, or even the IPO day. From that point forward, the line tells you the average price of all volume since that moment. That's insanely valuable because markets are about positioning. If price is above anchored VWOP, then the average buyer since that key moment is in profit. If it's below, they're underwater. And people who are underwater behave differently. They panic, they sell, they chase. So, another reason why anchored VWAP is so valuable is because it helps you see that psychology in real time. Brian argues in the book that you can anchor VWAP at fundamental events like earnings, price-based events like breakouts, or timebased events like the end of quarter or end of year. Truth be told, I'm less interested in timebased anchors, but I do suspect those might be beneficial for more longer time frame traders who are trying to get into the psychology of pension funds or hedge funds. The way I use anchored VWOP and the time frames I trade, I'll stick to fundamental and price-based events. Why is that? It's because so much of my trading revolves around fundamental changes in news or price-based technical patterns that have really gone crazy.
So why might anchored VWAP work? For those that aren't a part of my course, you should know that every single transaction, every single chart, and all of technical analysis, it's really just a visual representation of the psychology of the holders and those that are transacting. What anchor VWOP does is it provides a visual approximation of the rough average price of the average holder since key catalyst events or significant moments in the chart. And due to the psychological aspect of anchored VWOP, I can get a better idea of how they're feeling and what they might do next. The next reason why anchored VWOP differs from traditional VWAP is that the standard is nice for an intraday perspective. But what if I really want to know that data from a swing time frame or a bigger picture perspective? For that reason, I see value in what Brian Shannon is putting out there through anchored VWAP.
Now, probably the most important part is how I would use this to apply to my trading. Keep in mind, there is no one right way and I know many people who use VWOP far different from how I use VWAP. And that's why to be successful at trading, you need to develop your own trading playbook, which I cover in my next videos. So, subscribe and turn on notifications to not miss it.
I personally don't use anchored VWOP or VWOP as a literal level. What I mean by that is I am not buying or selling simply because we get above or below that line. Instead, I am more so viewing it as an indicator of trend. A simple common heristic I use is that I don't want to short a stock above VWAP unless it is capitulated or I don't want to long a stock below VWOP unless it is capitulated. Similarly, I find that same value in using anchored VWAP. What it does is provide me a visual representation of who is in the money versus out of the money and then in turn I can use it as a measure of trend.
As one example, take the recent euphoric move in circle following its IPO. My rule is that I won't short a stock holding above anchored VWOP unless we capitulate. That simple heristic kept me out of trouble as Circle exploded higher from 110 towards a whopping $300. However, we finally got that big capitulatory day on June 23rd, which then allowed me to start attacking the stock on the short side. Simple systems like this keep you out of trouble when the trend is against you, yet still involved once the trend has capitulated or reversed. For me, I want to be using Anchor VWOP after key catalyst events where you get massive volume turnover. I want to be using it following earnings, following big headlines, as well as anchoring it to key capitulation days and key breakout days.
Here's another example using a big news catalyst. United Healthcare, ticker UNH, was getting smoked on bad news after bad news. The nail in the coffin seemed to be a criminal investigation for alleged Medicare fraud on May 15th, 2025. Sure enough, we have some of the largest volume ever, capitulation lower, yet we retraced the move and closed strong that day. Ever since then, we've been holding above anchored VWOP anchored to that day of the news event. And so, if you are a swing trader, that is one way to structure a swing long where as of the time of this video, you still haven't been stopped out from your long.
Anchored VWOP works on all time frames. In the book, Brian gives a bunch of examples demonstrating as such. If you're curious about exploring this indicator, you might be wondering how to check it out for yourself. Anchored VWAP has been added to a bunch of charting software. As at the time of creating this video, I believe you can find anchored VWAP in Thinker Swim, Trading View, Trendpider, Sierra Chart, and more.
So, what's the bottom line in Brian Shannon's Anchor VWOP? Is this book worth reading? Speaking for myself, this indicator passes the BS test. It makes intuitive sense as to why it might provide value ad insights. It provides a visual representation of data that I otherwise can't easily calculate on my own. I can't just eyeball a daily chart and compute in my head where anchored VWOP would be. And finally, but most importantly, anchored VWOP can have actionable takeaways that influence your trading. Like VWOP, it allows you to structure rules and systems around your trading. While I personally don't use VWAP or Anchor VWOP as an exact level that I want to trade directly off of, it does provide important context to aid in my trading decisions. Like I always suggest, if this makes sense to you and you want to explore it, throw the indicator on your charts and see over the course of a few weeks if it has any value to you or start to back test simple rules and see how that impacts your trading data. Let me know in the comments if and how you use Ankor VWOP, as well as if you enjoy this style of video. I'm posting new videos every week. So, see you in the next one.