Anchored VWAP (Volume Weighted Average Price) is a powerful tool that shows the average price of an asset, weighted by volume, starting from a specific point you choose on the chart. Order blocks, on the other hand, are areas where large institutional orders are thought to have been placed, often acting as support or resistance. Combining these concepts can give traders a clearer picture of potential price movements.

Overview

The standard VWAP calculates the average price based on volume from the start of the trading day. Anchored VWAP (AVWAP) gives you the flexibility to choose your starting point – a significant high, low, or any other point of interest. This allows you to measure the average price from that specific event, giving you insight into how price is reacting relative to that anchor. The idea is that price often respects the AVWAP as support or resistance. Order blocks are identified by looking for large candles followed by strong price movement in the opposite direction. The premise is that institutions placed orders there and price is likely to react at those levels in the future.

When It Helps

AVWAP is most useful for identifying potential support and resistance levels based on a specific event. For example:

• Identifying Reversals: Anchor the VWAP to a swing low to see if price respects it as support on a pullback.

• Confirming Breakouts: Anchor to a significant high to see if price can sustain itself above the VWAP after breaking through.

• Spotting Order Blocks: Use AVWAP to gauge the strength of moves away from identified order blocks. If price quickly moves and stays away from the AVWAP anchored at the order block, it suggests strong institutional involvement.

How To Try

Most charting platforms, like TradingView, have an Anchored VWAP tool.

1. Select the "Anchored VWAP" tool.

2. Click on the chart at your chosen anchor point (e.g., the start of an order block or a swing low).

3. Observe how price interacts with the AVWAP line.

To identify order blocks, look for:

• Large bullish candles before a downtrend.

• Large bearish candles before an uptrend.

Key Settings

While the AVWAP indicator itself has limited settings, the key is where you anchor it. Common anchor points include:

• Swing highs and lows

• The beginning of a new trend

• The open of a specific trading session (daily, weekly, monthly)

• The start of an identified order block

Experiment with different anchor points to see what provides the most relevant information for your trading style.

Tips & Risks

• Discipline: Don't force the setup. If you can't clearly identify order blocks or relevant anchor points, wait for a better opportunity.

• Consistency: Use the same criteria for identifying order blocks and anchor points each time.

• Avoid FOMO: Just because price is near the AVWAP doesn't guarantee a reaction. Use other indicators and analysis to confirm your trading decisions.

• Risk Management: Always use stop-loss orders to protect your capital.

• AVWAP and order blocks are not foolproof. Markets are dynamic, and no indicator is 100% accurate.

Quick Checklist

• Identify potential order blocks on your chart.

• Select significant swing points for AVWAP anchors.

• Observe price action around the AVWAP.

• Confirm signals with other indicators.

• Always manage your risk.