VWAP trading

Thanks Def..

The whole idea of vwap trading is to trade as far away from VWAP as possible( in case you decide to go long)

.. How far though ?

2Standard deviation ( SD) away from VWAP is commonly considered to be a reasonable price to pay for a stock while intra day trading ..
The idea is that

1) you have bought cheaper than others
2) the price reverts back to its mean (statistically 95% of price dispersion falls 2SD away from VWAP..


Next time when that silly RSI shouted BUY BUY BUY because the stock is Over sold,, take a look at the VWAP figure and if it was too near to the ASK ignore the signal

hope this helps

iraj
 
Quote from Fast_Trader:

Does eSignal offer VWAP plotting on charts? Where can I find the VWAP of a particular stock?

Thanks,

-FastTrader
More...

RT has it in a beta version I use ...
 
You only need VWAP reading which is similar to Bid/Ask quote.. I donot use esignal so i would not know but i am sure there must be a way to get the VWAP from Esignal

this is the vwap reading on Realtick
 

Attachments

This software is a scanner which i have developed it with the aid of a friend of mine to scan and pick the most suitable trades intra day .. The scanner uses VWAP for bargain hunting..

iraj
 
Something important to consider regarding using the VWAP for intraday trading, the vwap is going to move on you quite a bit. For example. Say stock XYZ is trading at a VWAP of 30.50 and the low is 30.35 and the high is 30.67. Well let's say its two hours into the trading day. The stock is 30.40 bid by 30.42 offer, so you buy the .42, then all of a sudden size comes in to sell the low and make new lows, that VWAP is going to chage fast, in fact one large print could totally skew the VWAP. Now the stock is trading at the figure at 30.00 and the new VWAP is 30.15. Well your long at 30.42 and your way over the WVAP. Now what do you do? Don't mean to rain on anybody's parade but the VWAP is not that reliable. It's mostly uses as a measure for brokers to compare the fills they get to the WVAP on any particular stock. Brokers who can beat the VWAP at the end of the day get return business, those that don't, don't.
 
VWAP is one of the greatest momentum tools out there. Using it along with OBV can tell you where the volume bias is in a "reversal" candle. This tool has been a staple in my scanning and analysis, it's like using a magnifying glass on a candle. :)
 
Maverick,,

I am afraid you are not right in saying VWAP moves fast... VWAP in fact moves very very slow even when there is a sudden break out... The rate of change of VWAP is extremely slow .. It takes a lot of sell or buy volume to shift the VWAP ... chechk it out to day

iraj
 
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