Anchored VWAP in Forex (FX): A Practical, Beginner-Friendly Guide + 3 Simple Trading Playbooks
Anchored VWAP (AVWAP) is one of the cleanest ways to map “fair value” after a meaningful market event (a swing turn, a breakout, a news impulse). This post explains AVWAP in plain English, shows how to choose anchors in Forex, and gives you three simple, repeatable ways to trade it—without overcomplicating your chart.
Disclaimer: This article is educational only. It is not financial advice. Always test on a demo account first and manage risk.
If you want to apply this workflow on MetaTrader with multiple anchors, adaptive bands and alerts, here are my tools:
1) What is Anchored VWAP (AVWAP)?
VWAP is the Volume-Weighted Average Price. It answers:
“Where is the average traded price, weighted by activity/volume?”
Anchored VWAP (AVWAP) is VWAP that starts from a chosen anchor point instead of the session start. You decide the anchor based on a meaningful event:
- A major swing high / swing low (structure shift)
- A range breakout
- A news impulse candle (CPI, FOMC, NFP, etc.)
Think of AVWAP as a “fair value line since the event.” It helps you avoid guessing and gives you a logical reference for entries, risk, and invalidation.
2) Does AVWAP work in Forex?
Forex spot trading doesn’t have centralized exchange volume like stocks. On MT4/MT5, you often see tick volume (how many price changes occurred in a bar). That means AVWAP in FX is best understood as:
“The average price since the event, weighted by market activity.”
Even with tick volume, AVWAP remains very useful because it identifies:
- Balance (where price tends to gravitate back in ranges)
- Support/Resistance behavior in trends (pullbacks often react around AVWAP)
- Breakout retests (AVWAP from breakout candle often becomes the “line to hold”)
3) How to choose anchors in FX (the 80% skill)
Most traders fail with AVWAP because they anchor randomly. Use one of these anchor types:
A) Structure anchor (best for beginners)
- Uptrend anchor: the swing low that starts the new push up (ideally after a structure break).
- Downtrend anchor: the swing high that starts the new push down.
Simple rule: pick the point where you can clearly say “the market changed character here.”
B) Breakout anchor (range → trend)
When price breaks a clean range with momentum, anchor AVWAP on the breakout candle (or the first candle that starts the breakout leg). Then watch for a retest back toward AVWAP.
C) News anchor (event-driven FX)
Anchor at the impulse candle caused by major news (or the first candle that starts the post-news directional move). This helps you read “acceptance” vs “rejection” after volatility.
Pro tip (keep it clean): Use 1 primary AVWAP (main trend anchor) + 1 tactical AVWAP (latest breakout/news). More than that and you’ll confuse yourself.
4) How to read AVWAP: Trend, Range, Breakout
Regime 1 — Trend
- AVWAP has a visible slope (up or down).
- Price spends most of the time on one side of AVWAP.
- Pullbacks often react around AVWAP (or the first deviation band if you use bands).
Best approach: trade pullbacks in the trend direction.
Regime 2 — Range / Chop
- AVWAP is flat.
- Price crosses AVWAP frequently.
- False breaks are common.
Best approach: mean reversion back to AVWAP (don’t chase breakouts).
Regime 3 — Breakout / Repricing
- A clean range breaks with momentum.
- Price retests the new “fair value” zone.
Best approach: breakout → retest → continuation, using AVWAP as your “hold line”.
5) Three trading playbooks (entries, stops, targets)
Playbook #1 — Trend Pullback to AVWAP (highest consistency)
When to use: trending market.
- Bias: Only buy if price is above AVWAP and AVWAP slopes up. Only sell if price is below AVWAP and AVWAP slopes down.
- Entry trigger (simple): price pulls back to AVWAP, then closes back on the trend side (a “reclaim” close).
- Stop loss: beyond the pullback swing (below the pullback low for buys / above pullback high for sells). Give AVWAP a small buffer—treat it as a zone, not a hairline.
- Targets:
- TP1 = previous high/low
- TP2 = 2R or 3R (risk-to-reward)
- Optional: trail behind new swing points
- Invalidation: multiple closes on the wrong side of AVWAP (your timeframe) usually means the pullback is turning into a reversal.
Playbook #2 — Breakout → Retest to AVWAP
When to use: price breaks a clear range with momentum.
- Anchor: breakout candle (or first candle of the breakout leg).
- Entry: wait for retest back toward AVWAP; take the trade when price reclaims and holds AVWAP (or forms a small structure turn).
- Stop loss: below the retest swing for long (above retest swing for short).
- Targets: measured move (range height) or the next higher-timeframe level.
- Failure signal: retest breaks and can’t reclaim AVWAP quickly → stand aside (common in FX fakeouts).
Playbook #3 — Mean Reversion to AVWAP (range days)
When to use: AVWAP is flat and price whipsaws.
- Entry idea: take trades from “stretched” moves back toward AVWAP (especially if you use deviation/% bands).
- Stop loss: beyond the recent extreme (don’t place SL tight on AVWAP).
- Target: AVWAP (core target). Reduce position size in choppy markets.
- Warning: mean reversion fails when a real trend starts—if AVWAP begins sloping and price holds one side, stop fading.
6) Settings & best-practice (MT4/MT5)
Here are beginner-friendly settings that keep things simple:
- VWAP Source: HLC3 (industry default and stable)
- Bands:
- σ bands (StdDev) for “normal vs stretched” behavior
- % bands for fixed distance around VWAP (works well on volatile assets)
- Band interpretation: σ1 often behaves like a trend pullback area; σ2–σ3 are “extremes” that can revert (especially in ranges).
- MT5 note: if your broker provides real volume, you can choose it; otherwise tick volume is fine for FX.
- MT4 note: MT4 uses tick volume; treat AVWAP as an activity-weighted fair value line.
Session anchoring (super practical in FX):
- Anchor London open to gauge intraday bias.
- Anchor New York open to see whether price is accepting or rejecting the London move.
7) Common mistakes (and fixes)
- Mistake: Anchoring everywhere → chart becomes spaghetti.
Fix: 1 main anchor + 1 tactical anchor. - Mistake: Entering just because price “touched” AVWAP.
Fix: wait for a reclaim close, rejection, or a small structure turn. - Mistake: Treating AVWAP as a single pixel line.
Fix: use a buffer (structure-based stops) and think in zones. - Mistake: Trading mean reversion in a strong trend (or trend pullbacks in heavy chop).
Fix: read the regime: sloping AVWAP + one-side price = trend. Flat AVWAP + frequent crosses = range.
8) Tooling: plot multiple Anchored VWAPs easily (MT5 + MT4)
If you want to apply everything above with a clean, point-and-click workflow, I built Multi Anchor VWAP Pro for both platforms:
- Unlimited interactive anchors (with a live “ghost preview” before placing)
- Adaptive bands: σ1–σ3 or % bands
- Smart alerts: notify when price crosses VWAP or bands (tick or candle-close), including push/email/Telegram routing (optional)
- Lightweight & visual-only: no trading, no orders—just analysis and alerts
- Quality-of-life: dark/light UI, quick clear, shift projection, and more
Get the platform version you use:
Full step-by-step User Guide (installation, anchoring, parameters, best practice):
Multi Anchor VWAP Pro User Guide – Anchored VWAP Mastery for MT4 & MT5
Final thoughts
Anchored VWAP is not magic. Its power comes from using it correctly:
- Anchor on meaningful events (structure, breakout, news)
- Identify the regime (trend vs range)
- Trade simple rules (reclaim, structure-based stops, logical targets)
If you have questions, drop a comment on the guide post. Good luck and trade safe.
