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This interview features Brian Shannon—founder of AlphaTrends, 30+ year market veteran, and widely known as the “godfather of anchored VWAP”—on the Words of Wisdom podcast in Denver. Brian literally wrote the book on it (“Maximum Trading Gains with Anchored VWAP”) and breaks down why price, volume, and time—combined in anchored VWAP—reveal who’s actually in control: buyers or sellers. If you’ve heard the term tossed around but never got a clean, practical explanation from a pro who lives it every day, this is your moment.
In this piece you’ll learn how Brian uses anchored VWAP as a real-time sentiment and execution tool, when to wait for confirmation instead of “buying the dip,” and why swing trading timeframes often beat frantic day trading. We’ll cover how institutions run VWAP-based programs, how to anchor from key events (earnings, IPOs, major highs/lows), and how to manage risk with logical stops instead of fixed, rigid targets. By the end, you’ll have a simple playbook to spot control shifts, plan trades around levels of interest, and manage positions like a disciplined operator—not a guesser.
Brian Shannon Playbook & Strategy: How He Actually Trades
Core Philosophy: Price, Volume, Time—Unified by Anchored VWAP
Here’s the lens: Brian starts with the idea that price only “means” something when you know who’s in control—buyers or sellers—and anchored VWAP (AVWAP) shows that control from any key event. You’ll use AVWAP to see where the average participant is long or short and to frame risk where you’re wrong, quickly and cleanly.
- Plot AVWAP from meaningful events: earnings gaps, major highs/lows, IPO day, breaking-news spikes, failed breakouts.
- Treat AVWAP as “the line of accountability”—above it, longs have the edge; below it, shorts do.
- Never average down against a clearly-lost AVWAP; redefine the trade from the next key anchor instead.
- Use price vs. AVWAP + location (near/far) to size risk; widen or tighten stops based on distance from the anchor.
Where to Anchor: The Events That Actually Matter
Not every candle deserves an anchor. Brian focuses on moments that reset positioning: catalysts, extremes, or pivots where a large chunk of volume changed hands. This avoids clutter and keeps your reading crisp.
- Anchor from the day of earnings, the exact pivot high/low that launched a trend, IPO open, or a gap day’s first 1–5 minutes.
- If multiple strong events exist, stack multiple AVWAPs; confluence zones = higher signal.
- Replace “old” anchors when a new, bigger event supplants the narrative (e.g., fresh earnings wipe out prior anchor relevance).
- Ignore random mid-trend candles; anchor only where you expect trapped supply/demand.
High-Probability Long Entries: Reclaims and First Pullbacks
You’re looking for clean shifts from seller control to buyer control around AVWAP. Reclaims and first pullbacks let you lean on a level with small, logical risk.
- Reclaim setup: wait for a decisive move back above a key AVWAP, then buy the first higher low that holds above it.
- Pullback rule: after the initial push above AVWAP, buy the first pullback that retraces ≤38.2% of the opening leg and holds above AVWAP.
- Require RVOL on the thrust ≥1.5 on 5-minute bars (or ≥2.0 on the opening drive) to confirm real participation.
- Place stop 5–15c (or 0.2–0.4 ATR(14) on your execution timeframe) below AVWAP or the pullback low—whichever is tighter.
- First target = prior swing high/ORH; trail partials under rising AVWAP or the last higher low.
Short Setups: Fails, Rejections, and Anchored VWAP From Highs
On the short side, you’re fading trapped longs or momentum exhaustion into a key AVWAP from the high. You want failure to reclaim, followed by a lower high you can lean against.
- Anchor from the most recent major high; look for price to rally into that AVWAP and fail to reclaim on RVOL ≥1.3.
- Enter on the first lower high under the anchored line; stop 5–15c (or 0.2–0.4 ATR) above the failure wick.
- Add only on a second lower high that forms beneath the same anchor or under a stacked confluence of anchors.
- Initial target = prior day low or the nearest demand shelf; extend target if AVWAP rolls over and 20EMA is below the sloping-down anchor.
Multi-Anchor Confluence: When Levels Become Zones
Multiple anchors from different events often cluster. Those zones tend to act like magnets and decision points—great places to plan trades and scale risk.
- Plot anchors from: (1) last earnings day, (2) last swing high/low, (3) day-1 gap open, (4) major news spike.
- A tight cluster (within 0.3–0.5% of price) = high interest; trade the break/reclaim with confirmation (RVOL ≥1.5 on the trigger bar).
- For longs: buy above the top of the cluster after it flips to support; for shorts: sell below the bottom after it flips to resistance.
- Trail under/over the cluster midline; if price loses the zone, exit—your thesis is broken.
Timeframe Stack: Align Higher Timeframe Bias With Lower Timeframe Triggers
Brian favors swing-friendly structure with tactical entries. Get the wind at your back on daily/weekly, then execute on 30m/5m so your stop is small but your idea is big.
- Determine HTF bias with daily/weekly AVWAP(s) and trend of higher highs/lows or lower highs/lows.
- Only take LTF longs when the price is also above the relevant daily AVWAP; avoid countertrend unless it’s a day trade with strict risk.
- Execute entries on 5–15m; manage partials on 30–60m; confirm trend health on a daily.
- If HTF and LTF AVWAP signals disagree, reduce the size or pass.
Opening Drive Tactics: Using AVWAP From the Open
The open reshuffles positioning fast. Anchoring from the session open filters noise and clarifies who grabbed control in the first minutes.
- Plot AVWAP from minute 0; if price holds above the open AVWAP for the first 10–15 minutes on RVOL ≥2.0, prefer long-side setups.
- Longs: buy the first 5–15m pullback that tags or front-runs the open AVWAP and holds; stop a tick below the test.
- Shorts: if price cannot reclaim the open AVWAP after a halt/drop, short the first lower high below it.
- If the open AVWAP chops with whipsaws, step aside and wait for a higher-timeframe anchor to dominate.
Risk, Size, and Trade Management: Rules You Can Repeat
Edge comes from repeatable risk. Tie size to distance-to-invalid, scale out into strength/weakness, and keep a consistent playbook for when to kill the trade.
- Risk per trade: 0.25–0.75R of daily risk budget; position size = (risk $) ÷ (entry − stop).
- Scale plan: take 1/3 off at 1R, move stop to breakeven+; trail remainder using last higher low (longs) or lower high (shorts).
- Two-bar violation rule: exit if you get two consecutive closes on your execution timeframe through AVWAP against your position.
- Time stop: if price stalls at AVWAP for >5–7 bars with RVOL <0.8, reduce by half—your edge is decaying.
- News/volatility guard: cut size by 30–50% near scheduled catalysts unless that catalyst is your anchor.
Continuation vs. Mean Reversion: Know Which Game You’re Playing
AVWAP works for both, but the rules differ. Define the game first so you don’t mix signals and sabotage your edge.
- Continuation longs: buy reclaims/pullbacks above rising AVWAP; no entry if slope is flat/down.
- Mean reversion longs: only fade into AVWAP if HTF bias is up and RVOL on the flush is capitulatory (e.g., single bar RVOL ≥2.5) and then dries up (<0.8).
- Continuation shorts: sell lower highs below falling AVWAP; no entry if slope is flat/up.
- Mean reversion shorts: fade into AVWAP after panic-squeeze exhausts (RVOL spike then fade) and HTF bias is down.
Scanning & Prep: How to Build a Focused Watchlist
Spend your energy where AVWAP matters most—names with catalysts, range expansion, and clean structure. Prep is half the trade.
- Daily scan for: earnings, fresh 52-week highs/lows, multi-day consolidations, prior day range >1.5× 20-day ATR.
- Mark two to three likely anchors per name you’ll trade tomorrow; predefine invalidation and first targets.
- Avoid tickers with overlapping anchors every few cents—signal-to-noise is too low.
- Pre-market filter: require pre-market RVOL ≥1.5 and range ≥0.75× average to consider an opening-drive plan.
Add/Reduce Rules: Pressing Winners Without Imploding
Add only when the market proves you right again, not because you “feel” it. Reductions keep you in the game when structure wobbles.
- Add on a higher low (longs) or lower high (shorts) with AVWAP still in your favor and trigger-bar RVOL ≥1.5 of its 5-bar average.
- Never add if your stop would expand; each add must tighten or maintain the same dollar risk.
- Reduce by 25–50% on the first close back through a fast EMA (e.g., 10EMA) against your position while still above/below AVWAP; exit the remainder if AVWAP flips.
- No third add; after two adds, only the trail.
Playbook Triggers You Can Copy-Paste Tomorrow
These are straight-from-the-chart conditions you can scan and execute. Keep them mechanical to avoid hesitation.
- Long “Reclaim + First Pullback”: price crosses above anchor, RVOL ≥1.5 on the reclaim bar; buy first pullback that holds above the anchor; stop under pullback low or anchor; target = prior high, then trail.
- Short “Reject the High Anchor”: price rallies into AVWAP-from-high and prints a failure wick; RVOL ≥1.3 on rejection bar; sell first lower high; stop above the wick; target = prior demand.
- Long “Confluence Break”: two or more stacked anchors within 0.5%; buy through the top with LTF close above; stop inside the cluster; partials at 1R and structure highs.
- Short “Open AVWAP Fail”: can’t reclaim session AVWAP for 10–15 minutes, lower high forms; sell with stop a tick above that LH; cover some at prior low, trail rest.
- “Two-Bar AVWAP Violation Exit”: any open trade—flatten if two consecutive closes through AVWAP against your direction on the execution timeframe.
Size Risk First: Define Your Max Loss Before You Click Buy
Brian Shannon insists the trade starts with risk, not the setup. Before he thinks about entries, he fixes a dollar amount he’s comfortable losing and backs into position size from that number. That simple discipline turns a scary unknown into a clean, repeatable rule you can follow under pressure. If the stop is wide, the size gets smaller; if the stop is tight, size can increase—never the other way around.
He also ties invalidation to a logical level (like a key swing or AVWAP), not a random round number. The stop goes where the trade thesis is wrong, period. From there, he measures reward in R-multiples so reviews stay consistent across tickers and timeframes. You’re not trying to be a hero—you’re trying to survive long enough to let good process compound.
Let Volatility Set Position Size and Targets, Not Your Emotions
Brian Shannon treats volatility as the metronome for risk. He sizes positions inversely to ATR or recent true range so that wild tapes don’t blow him out and quiet tapes don’t bore him to death. When ATR expands, he cuts size and allows a wider, thesis-based stop; when ATR contracts, he can carry a bit more size with tighter invalidation. This keeps his dollar risk steady while the market’s mood swings.
Targets flex with volatility too—Brian Shannon frames profit in R and in multiples of the prevailing range, not wishful thinking. He refuses to force a fixed 1:2 when the regime only offers 0.8R before known supply; he’ll take the paid move and reset. A simple guide he uses: if 20-day ATR is X, expect intraday follow-through in the ballpark of 0.25–0.5X and plan partials around that reality. The result is calm, repeatable execution where the tape’s temperature sets the pace, not adrenaline.
Diversify by Strategy, Timeframe, and Ticker—Stop Cloning the Same Trade
Brian Shannon spreads risk across play types, not just symbols. He’ll run a trend-continuation setup on one name, a mean-reversion probe on another, and a catalyst-driven AVWAP reclaim on a third—so one bad regime doesn’t sink the day. Timeframe diversification matters too: a swing anchored to daily AVWAP shouldn’t live or die with a five-minute scalp. When correlation spikes, he trims overlapping exposure so he’s not secretly running the same trade three ways.
Brian Shannon also diversifies by “job description.” One position is the core swing with wider stops and partial adds; another is a tactical day trade designed to harvest range without marrying the name. He won’t stack five tech momentum longs just because they all look pretty—he mixes sectors and bet structures to avoid single-factor risk. The goal is simple: multiple independent edges working at once, so your P&L doesn’t hinge on one idea behaving perfectly.
Trade the Mechanics: Levels, VWAP, and Rules Over Predicting Headlines
Brian Shannon doesn’t chase narratives—he trades repeatable mechanics. He marks the anchored VWAP from meaningful events, sets alerts at prior swing highs/lows, and waits for reclaim-or-reject behavior that he can define in advance. If price is above a rising AVWAP and holding higher lows, he looks for a first pullback entry; if it’s below a falling AVWAP, he hunts lower highs for shorts. No thesis about what the Fed “should” do—just price, volume, and accountability to a line.
When headlines hit, Brian Shannon still lets structure make the call. A news pop that can’t hold above the anchor is a fade; a break-and-hold with RVOL confirmation is a go. He preplans stops at “thesis invalid” levels, not round numbers, and sizes based on distance to that line, so he never negotiates with risk mid-trade. The result is less guessing, more execution—and a process that works on Monday morning the same way it works on FOMC day.
Prefer Defined-Risk Entries, Preplan Exits, and Review Process Every Session
Brian Shannon starts every trade with a clearly defined invalidation level and a preset dollar risk—no exceptions. He scripts the exit before the entry: partials at logical targets, stops at “thesis is wrong,” and a trail that moves only when structure evolves. This turns execution into following directions, not making decisions under stress. If the tape changes character, he obeys the plan and flattens—he doesn’t “give it a little more room.”
After the close, Brian Shannon reviews each trade in R-multiples and structure terms: Was the entry at reclaim, pullback, or lower-high? Did RVOL confirm? He flags rule breaks, adjusts triggers, and updates anchor levels so tomorrow’s plan is tighter. Wins get dissected for repeatable patterns; losses get mined for process leaks, not blame. The habit compounds: define risk, preplan exits, and run a daily post-mortem until it’s muscle memory.
Brian Shannon’s core lesson is simple: anchor your decisions to objective structure, not opinions. He treats anchored VWAP as the line of accountability that reveals who’s in control from any meaningful event—earnings, IPOs, major highs/lows, or news gaps—and he won’t argue with it. If price is above a rising anchor with supportive RVOL and higher lows, he leans long; if it’s below a falling anchor with lower highs, he hunts shorts. No averaging down against a lost anchor, no guessing what headlines “should” do—price, volume, and time make the call.
From there, Brian Shannon builds a process that survives volatility. Risk is defined first, position size is set by distance to invalidation and the tape’s current range, and exits are preplanned in R-multiples with clear triggers (two closes through AVWAP against the position, loss of structure, or failure to reclaim). He favors swing-friendly timeframes that let institutions’ VWAP behavior do the heavy lifting, uses multi-anchor confluence to find high-interest zones, and diversifies by strategy and timeframe so one regime can’t sink the day. The takeaway: trade mechanics you can repeat—anchor, confirm, risk-manage, review—so your edge compounds without needing to predict the future.
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