Anchored VWAP vs Chaikin Money Flow
Anchored VWAP averages price weighted by volume from a starting point you choose, so its output is an actual price level. Chaikin money flow sums close-position-weighted volume over a fixed lookback and then divides by the total volume in that window, producing a bounded ratio rather than a cumulative total.
Both combine price and volume, and they produce outputs of different kinds. One is a price you can act at. The other is a proportion, which sounds like a technicality and is the reason it can be used across a whole list of instruments at once.
What each one is
Anchored volume-weighted average price averages price weighted by volume from a starting point you choose. Anchored VWAP covers it.
Chaikin money flow sums each bar’s volume scaled by where the close sat in its range, over a lookback, and divides by the total volume over that same window. Chaikin money flow covers it, and accumulation/distribution covers the cumulative version it is built from.
One is absolute and the other is relative. Whereas the anchored average is a price in the instrument’s own units, the money flow reading is a fraction — it has no units and it does not grow just because more time has passed.
Where they differ
Whether the reading is comparable elsewhere. This is the money flow measure’s real advantage. Because it divides by volume over the window, a reading of 0.2 means the same thing on any instrument at any size — so it can be screened across a list, which a cumulative total can never be.
Whether it has a window. The anchored average runs from your anchor to now, so it covers a growing period and moves more slowly as it lengthens. The money flow reading uses a fixed lookback, so it stays equally responsive throughout.
What you do with the output. The anchored average carries an order directly. The money flow reading is a filter — it says whether conditions support a position, and something else has to supply the price.
Where the judgement sits. The anchored average’s judgement is the anchor, chosen once. The money flow measure’s is the lookback length, which sets how much history the ratio reflects.
Where they agree
Both need trustworthy volume, so neither works on spot foreign exchange, where there is no consolidated tape.
Both inherit the close-position weighting problem. A bar that closes in the middle of its range contributes almost nothing to either, no matter how large it was.
Both cost a round trip when acted on — 0.0098 on this site’s shared series, about 2% of the median bar range of 0.493.
And both are weakened in a range. Direction runs here average 2.01 bars with a longest of 11, which produces a level price crosses repeatedly and a reading that oscillates around zero.
Which one to use
Use the anchored average when you have an event to anchor to and need a price. A gap, a result, the start of a move — the level then names the average price paid by everyone trading since, which is a shared reference and an actionable one.
Use Chaikin money flow when you are screening rather than trading a single chart. The division by volume is what makes a ranked list possible, and no cumulative volume tool can be used that way at all.
Use them together on one chart. The reading filters and the level prices, which is a genuine division of labour.
And when you cannot name a sensible anchor, use the money flow reading alone. An arbitrary anchor produces a level about an arbitrary group of trades; the ratio requires no such choice.
Why dividing by volume is the substantive design choice
Because it removes the instrument’s size from the reading. On-balance volume and the raw accumulation line both grow with the amount traded, so a large company’s line and a small one’s are not on the same scale and cannot be compared. Dividing by volume normalises exactly that.
And because it introduces its own weakness. A quiet lookback gives a small denominator, so a handful of bars can push the ratio to an extreme that reflects an absence of trading rather than a flow of it.
The original data
Of the 24,971 unique videos in the search corpus, no title compares these two directly. Chaikin money flow appears in 44 titles at a median of 2,257 views across 36 channels. Anchored volume-weighted average price appears in 29, at a median of 14,972 across 27.
More videos and a seventh of the audience on the money flow measure. It has one of the lowest medians of any indicator measured here despite being the more portable tool, which fits a subject with no narrative attached — a ratio is harder to make a thumbnail out of than a line on a chart.
On the chart above the disagreement is the whole value of running both. A good level with negative flow behind it is exactly the case a single tool would let you walk into.
When it fails
The characteristic failure is treating a Chaikin money flow extreme in a quiet period as a strong signal. The reading is a ratio, so its denominator is the volume over the lookback — and when that window is thin, a small number of bars closing near their extremes pushes the value to a large positive or negative figure. What looks like decisive flow is a small numerator over a very small denominator, which is a statement about the absence of trading rather than about its direction. The display gives no indication of how much volume produced the reading, so the weakest readings look identical to the strongest.
A second failure is anchoring the weighted average arbitrarily, which produces a level about an arbitrary set of trades.
A third is using either on spot foreign exchange, where the volume figure belongs to one broker.
A fourth is expecting either to register a wide two-way bar, which the close-position weighting discards by construction.
And a fifth is reading a flow divergence as a forecast, when most resolve by the reading catching up rather than by price turning.
Related
Anchored VWAP covers the level and the anchor choice. Chaikin money flow covers the lookback and the division by volume. And accumulation/distribution covers the cumulative line beneath it.
The underrated feature of Chaikin money flow is the division. It turns a cumulative total into a proportion, so a reading of 0.2 means the same thing on a large stock and a small one — which is not true of on-balance volume or the raw accumulation line, and it is why those cannot be screened on.
— Michael Whitman
This page is educational, not financial advice. Test every idea on your own charts before risking money.