Point-and-Click Anchored VWAP for NinjaTrader
, 2 min reading time
Scalp Radar is excited to introduce our first NinjaTrader indicator, Anchored VWAP. Recognizing the need for traders to quickly re-anchor VWAP alongside other indicators, we've incorporated point-and-click functionality for ease of use. Created as an indicator rather than a drawing tool, it integrates seamlessly with the usual alerts, strategies, and features typically associated with indicators.
How does Anchored VWAP work?
Anchored VWAP (Volume Weighted Average Price) is a trading indicator that provides a comprehensive view of a stock's price, taking into account both volume and price levels. Unlike a standard VWAP, which typically starts its calculation at the beginning of a trading day, the Anchored VWAP allows traders to set the starting point (anchor) at a specific past event, such as earnings reports, major news releases, or significant highs/lows. This customization provides a more relevant and specific analysis for the selected period. Another way of putting is is VWAP and AWAP reflect what the collective "average" buyers break even price is.
The Anchored VWAP is calculated using the following formula:
Where:
- Volume is the number of shares traded at each price level.
- Price is the price at which the shares are traded.
The sum is taken from the anchor point to the current day, incorporating both the price and the volume of trades in that period.
How do traders use AVWAP?
Traders utilize the Anchored VWAP for various purposes:
- Trend Identification: It helps in identifying the trend direction over a specific period. Prices above the Anchored VWAP may indicate an uptrend, while prices below suggest a downtrend.
- Price Analysis: It offers insights into whether a stock is overvalued or undervalued in the context of its volume-weighted price since the anchor date.
- Support and Resistance Levels: Traders use it to identify potential support and resistance levels, as prices often gravitate towards the Anchored VWAP line.
- Entry and Exit Points: It aids in determining optimal entry and exit points for trades, especially in a more targeted time frame
- You can see an example of a strategy using a-Vwap here
Institutional traders and funds often use VWAP as a benchmark. If they can buy below the VWAP, or sell above it, they are achieving a better-than-average price, which means it may act as potential support or resistance.
Look forward to another post where we demonstrate how to back-test AVWAP strategies.
