How to Choose an Anchor for Anchored VWAP
Learn to read anchored VWAP from an earnings release or another predefined event. Calculation examples explore hindsight bias in anchor selection and automatic versus manual anchors.
Anchored VWAP averages price and volume accumulated from a user-defined starting point. Changing the anchor can make the same current price appear above or below the average. Define the event you want to analyze and its start time before looking for a point where the line appears to fit well.
The anchor expresses the analytical question
The starting point depends on whether you want to examine trading after an earnings release or price formation after a particular disclosure. For an after-hours announcement, the included data differ depending on whether the anchor is set at the last bar before the announcement or the first bar of the next trading session. Recording the public release time and the first bar that could reflect it, rather than just the event date, makes the analysis reproducible. Even when using a historical high or low, consider when that point could actually have been identified to reduce hindsight-based selection.
Converging lines are not independent evidence
Anchors set on nearby dates share much of the same trading data. If they all include recent high-volume trading, the lines can cluster around similar levels. Do not extend this into proof that multiple investor groups have matching average cost bases. One anchor represents an observation window, not a tracked group of actual holders. If using several lines, record the question each answers and its included window; if they differ little, consider whether the information is duplicated.
Distinguish automatic shifts from fixed manual anchors
Automatic anchoring tools may move their starting point according to the selected rule or chart interval. A manual anchor starts at the point selected by the user, so do not assume tools work the same way based only on their names. If the anchor changes over time, compare the calculation windows before directly comparing new and old values. To evaluate whether price reacted near the line, record the outcome without moving the line again. Missing volume data, split adjustments, and changes in representative-price settings also alter the average, so maintain consistent data conditions. Keeping the original chart with its anchor unchanged also makes it easier to check later whether the line’s starting point moved.
Worked example
Hypothetical example: Before an event, 1,000 shares trade at 80 won; after it, 100 shares trade at 100 won and another 100 at 110 won. VWAP anchored after the event is 105 won, while the average including all three segments is 101,000÷1,200, or about 84.17 won. A current price of 102 won is below the first average and above the second. Instead of deciding which line is correct, record that the lines cover different observation windows.
What to check
- Record the reference event and public release time first.
- Check whether the starting bar includes trading from before the event.
- Distinguish manual anchors from automatic anchor-shifting rules.
- Do not move an anchor to a favorable position after seeing the outcome.
Sources and primary materials
This is educational material about research methods. For an actual company decision, verify the filings and primary sources for the relevant period.