Using the VWAP while trading
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Robert Morse
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It is very good for large stocks orders you wanted filled over one day or one set period of time.
Not exactly on your question, but when I tick-scalped (ancient years ago), I found the comparison of the MFI with Lane's Stochastic to be very useful. The MFI is a volume-weighted Stochastic in no small way.
In thinking further (we need an emogi for chin-scratching "Hmmmmm."), I think that if you algebraically removed the 0.0↔1.0 normalization in the MFI, you might end up with a VWAP. But that's stretching my memory. It'd be fun to check out, though.
In thinking further (we need an emogi for chin-scratching "Hmmmmm."), I think that if you algebraically removed the 0.0↔1.0 normalization in the MFI, you might end up with a VWAP. But that's stretching my memory. It'd be fun to check out, though.
Search jperl posts over at traders lab. He had a few threads on the subject years ago.
http://www.traderslaboratory.com/fo...rading-market-statistics-iii-basics-vwap.html
it is also very good for thinly traded stocks for the same reasons.
Robert Morse
Sponsor
The problem with thinly traded stocks is that automated traders can see the constant source of orders looking to match the Vwap and game the order flow. Harder to see with active stocks.
I scalp /intraday trade (always flat EOD) and would never use it for anything other than scalping.I only trade stocks that are very active/liquid stocks.
VWAP is the only thing I have on my charts,but I find I don't use it as much as I use to. If it meshes with my instinctive chart skills for entries and exits,that's a positive.
That being said.....
VWAP is best used during the early hours .
VWAP is less sensitive to price as the day moves along.
VWAP lag is more pronounced later in the trading day.
If a stock has a nice run up and then retreats back to VWAP ..this could indicate a strong support area and possibly another mini run .
You can't rely on the VWAP only for valid buy or sell signals,you have to have some chart skills.
Great reply. Thank you.