Maximum Trading Gains With Anchored VWAP

It has been estimated that during the year 2020, some ten million people opened a brokerage account for the first time. In the first six months of 2021, another ten million new brokerage accounts were opened. If the statistics are to be believed, then in a span of eighteen months we’ve seen the start of the investing careers of over twenty million Americans. According to the brokerage firm Charles Schwab, approximately 15% of its 31.5 million retail customers first got into the stock market in 2020. The timing, frankly, has not been great. While the pandemic gave rise to a generational boom in curiosity about investing and trading, the aftermath has been a punishing experience for most participants. In attempting to estimate the damage of 2022’s bear market, JPMorgan Chase researchers have determined that in the first ten months of the year, the typical personal portfolio has fallen by 44%. Among some of the younger, more aggressive traders in this newly arrived class, you can imagine the losses being significantly worse. The anecdotes and chatter make it abundantly clear that we now have millions of people risking their money each day in the stock market while very few of them have any education or strategy beyond reading chat rooms and pressing buttons. Undoubtedly, in the aftermath of a financial market plunge, people will be out seeking better information about investing. The desire for education always comes after a lot of money has been lost, never beforehand. And that’s perfectly normal. Every generation has to learn for themselves. The stories of veterans or the lessons found in books will never be able to replace the power of firsthand experience with losses. Many of the new entrants will make the decision that they’d like to do a lot less overall and leave more of their results in the hands of the market gods. These investors will eventually discover iShares and Vanguard, the SPY and the QQQ. They’ll make simpler decisions about asset allocation and let the future take care of itself. They’ll buy index funds and pursue dollar cost averaging strategies and find something else to talk about at backyard barbecues now that the desire to trade stocks has come and gone. But not everyone. For many, it will become more than just a hobby or a passing fad. The passion to trade and be involved in the markets will be a lifelong pursuit. A daily activity. In some cases, a calling. Among the generation of 2020’s new market entrants, millions of people will find themselves in this category of active trader. And they’re going to be on the hunt for methods, strategies and insights that can help them improve what they’re doing. They’ll be in search of structure and meaning. Actual expertise. Rules. Signal. Clarity. One can only hope that they’ll encounter the teachings of Brian Shannon, as early as possible, upon their journey. I first became aware of Brian Shannon toward the end of the aughts decade, in the aftermath of the Great Financial Crisis, when I began writing publicly about stocks and investing on my blog. Then, like now, millions of people were in search of good answers about investing and trading. They watched as some of the most storied investment houses on Wall Street had blown themselves to smithereens, having ignored even the most basic tenets of risk management in their own proprietary trading. Was there anyone else out there worth listening to? Worth trusting? The more you’d ask this question of professional traders, the more you’d hear Brian’s name. Again and again, the people who knew referred to Alphatrends and Brian Shannon. Intrigued, I decided to take a look at what all the buzz was about. Brian was popular among traders on social media, but so were a lot of people. Watching his early videos, made in the infancy of YouTube, you could tell there was something meaningful going on, with all kinds of instruction and narration as the screen flashed upon his latest charts and trading setups. He had an explanation for why he was doing things, and there was a depth of detail going into his decisions each day you simply did not see elsewhere. His work spoke for itself and his popularity as both a teacher and a leader was not surprising. Brian Shannon is a trader’s trader. His influence can be seen and heard among trading communities around the world. So I had become a fan of Brian’s work before meeting him in person. We eventually got together and bonded over a powerful idea about there being truth in price. Honesty in what people actually do in the markets versus what they say they do. Price isn’t always right but it is absolutely always the reality of what’s taken place that day. Undeniable. So there we were - he, a trader, and me, an investor, working on very different timeframes and behaving quite differently in the markets each day. But we agreed that there is meaning to be distilled from the actual buying and selling of real market participants. Both of us preferred the concept of respecting price as opposed to following our feelings. I eventually internalized and adopted one of his most well known colloquialisms: Only Price Pays. Brian likes to point out that one can obsess over any aspect or dimension of market-watching that they’d like, but, in the end, the price of the stock (or bond, or commodity, or coin) is the thing that will determine how much has been made or lost by every market player. There are no conditions, no asterisks, no footnotes and no do-overs. In his new book, Brian introduces the concept of the Anchored Volume Weighted Average Price or AVWAP, an evolution of the work he’s been doing for decades. Brian likes to point out that he didn’t invent looking at volume weighted average prices for information, but that he has certainly become the VWAP’s adoptive father in terms of promoting its use as a trading tool. Brian’s explanations of this approach to trading, along with over one hundred color charts, will serve as a definitive framework for understanding the three most important components in the market: price, time and volume. His constant emphasis on risk management and market psychology will fill in a lot of the knowledge gaps that so many traders are currently struggling with, regardless of how long they’ve been working on their craft. I was fortunate to meet and begin learning from Brian early enough in my career that it’s made a meaningful difference in how I think about and process the things I see across my screens each day. I hope he will have a similar impact on the next generation who will be discovering him for the first time as a