How do I use VWAP in different kinds of market?
(1/n)
(1/n)
As most of us know, VWAP stands for volume weighted average price. It is the avg price of the stock or index taking into consideration volumes traded in it.
(2/n)
(2/n)
Popular method of trading is buying above intraday VWAP and selling below intraday VWAP but it does not most of the time. Why?
Because trader forgets an important element - Market context.
(3/n)
Because trader forgets an important element - Market context.
(3/n)
What are the important things I look at when using VWAP?
1. Type of market opening.
2. Ignoring VWAP in opening 15-30 mins in case of strong gap up/gap down opening.
3. Pullbacks which breach VWAP
4. Orderflow data when price breaches VWAP.
(4/n)
1. Type of market opening.
2. Ignoring VWAP in opening 15-30 mins in case of strong gap up/gap down opening.
3. Pullbacks which breach VWAP
4. Orderflow data when price breaches VWAP.
(4/n)
If some market participants is to build a position using passive orders, VWAP becomes very important
They won't build a long position above VWAP as they would be buying for more than the avg price
They won't build short position below VWAP as they would be selling cheap
(5/n)
They won't build a long position above VWAP as they would be buying for more than the avg price
They won't build short position below VWAP as they would be selling cheap
(5/n)
Using this as a guiding principle; lets have a look a few kinds of market openings:
1. Range opening - Opening inside prev day range, rejection at POC and downmove.
(6/n)
1. Range opening - Opening inside prev day range, rejection at POC and downmove.
(6/n)
Sometime during the day, we went above VWAP. Now, traders should not use it as a buy signal.
Why? Lets have a look at orderflow here
(7/n)
Why? Lets have a look at orderflow here
(7/n)
You can see how passive sellers absorbed the buying above VWAP and then started selling aggressively.
(8/n)
(8/n)
9. Range expansion and reversal at open:
We opened and went below prev day low and immediately reversed
(9/n)
We opened and went below prev day low and immediately reversed
(9/n)
Passive buyers are absorbing the selling and price starts moving up.
(10/n)
(10/n)
Further confirmation, zones where shorts who sold aggressively at open were taken out.
This was additional confirmation to long.
(11/n)
This was additional confirmation to long.
(11/n)
Coming up: How I use OF and VWAP to predict mid-day reversals, how I use it on trending days
If enough people show interest, will add it to this thread
(12/n)
If enough people show interest, will add it to this thread
(12/n)
If you liked the contents, make sure to re-tweet and like the tweet. Will add more to it. Also, follow me @KillerTrader_
Imp links: Live market trades - t.me
(13/n)
#StockMarket #Nifty
Imp links: Live market trades - t.me
(13/n)
#StockMarket #Nifty
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