Vwap

[Whale Song]

Do any other traders consider VWAP a useful tool for trading NASDAQ stocks?

I have been putting VWAP through its paces over the last couple of months and using it in a manner similar to Bollinger bands. Why I feel it serves and even better purpose than B-bands is that in active markets, it tends to be far more responsive to momentum than B-bands.

I have not done any parallel testing, but my intuition is you get a larger slice of the action using VWAP. Not in at the bootm out at the top, but certainly more than with Bollingers.

 

[Trader333]

The member known as Grey1 devoted a whole thread on using VWAP but it is now not accessible. VWAP is still used though and profitably.


Paul

 

[Whale Song]

Do you mean Grey1 is not accessible or the thread? If it's the thread, has it been archived - can it be brought out of moth-balls?

 

[commanderco]

Do any other traders consider VWAP a useful tool for trading NASDAQ stocks?

I have been putting VWAP through its paces over the last couple of months and using it in a manner similar to Bollinger bands. Why I feel it serves and even better purpose than B-bands is that in active markets, it tends to be far more responsive to momentum than B-bands.

I have not done any parallel testing, but my intuition is you get a larger slice of the action using VWAP. Not in at the bootm out at the top, but certainly more than with Bollingers.

I dont know if this helps, since I do not trade stocks
http://www.itginc.com/research/whitepapers/madhavan/TP_Spring_2002_Madhavan.pdf

 

[Whale Song]

I dont know if this helps, since I do not trade stocks
http://www.itginc.com/research/whitepapers/madhavan/TP_Spring_2002_Madhavan.pdf

Thanks commanderco. Puts a little more meat on the bones and confirms on a more empirical basis what it is I've been intuiting on an experiential level.

Has a couple of what are for me exotic trade strategies while I've been treating them as less 'elastic' Bollingers. With VWAP you appear to get a real mean to revert to whereas Bollingers tend to whip around too freely - and they-ve only got the upper and lower bands to play with.

My first post may have given the wrong impression when I stated VWAP tends to be more responsive, I didn't mean the bands flip around even more sprightly than Bollingers - quite the opposite. They tend to make the entry/exit far more precise. I'm tending to get less trades using VWAP than Bollinger, but higher profitability in the trades I am taking.

Thanks again for the paper.

 

[breadman]

remembering grey1 thread

Hello trader 333,
i remember the thread grey1 using a vwap / pairs strategy. together with yourself you both seemed to be producing successful positions.

is Grey1 still running his personal thread?
can't work out why that particular thread wouldn't be available anymore, i remember it been an excellent thread at the time.

what software are people using to get real-time VWAP together with the the historical data?

 

[LevII]

Hello trader 333,
i remember the thread grey1 using a vwap / pairs strategy. together with yourself you both seemed to be producing successful positions.

is Grey1 still running his personal thread?
can't work out why that particular thread wouldn't be available anymore, i remember it been an excellent thread at the time.

what software are people using to get real-time VWAP together with the the historical data?

1. G1 was ill some time ago and, although he has posted here from time to time since, he has not run the thread since then.

2. The thread became a private one when the odd disruptive person became a nuisance. Access was by G1 invitation only. The thread remains private and contains G1's intellectual property.

3. Generally Tradestation although other platforms can track VWAP & MPD.

 

[Trader333]

If you look back through last year I posted a lot of VWAP live trades that used both the pairs strategy and normal directional trades. It should not be used in isolation to trade but when combined with Price Volume analysis it is useful as a basis to select suitable market neutral strategies. Grey1 stopped posting his own trades which were highly profitable when he became ill and the subject has not since been discussed much.


Paul

 

[Grey1]

Song ,,

Thanks for your email.. I thought to reply to your email in here for the benefit of others on the BB .

Welcome to the world of VWAP trading. We introduced VWAP trading in 2001 on this BB and extended its application to arbitrage and hedging analysis around 2004 , again on this BB with its real time application in our chat room . I have always been a believer of no none sense approach to trading and that is “ YOU THINK IT WORKS THEN SHOW ME IN REAL TIME IN A CHAT ROOM “ other wise donot waste my time ..

VWAP is the only and only true bench mark where most institution traders use to conduct business as most brokers use their VWAP engine to shift huge amount of volume intra day nice and quietly ( you must have heard the statement “ who is the AX to day for a particular stock .. The trick is now that we know who the hell AX is , how the hell is he going to shift his stocks during trading day with out over paying .. This is what trading business is all about .. once you know how he does it then you can follow him to enter your trade safely . right in the direction of the big heavy weight gorilla .. technicians call it TREND ) .

You as a trader can develop a simple vwap engine to mimic more complicated strategies to be on the TREND side if you simply go through all my posts in the past on the BB . ( there are also some on the private forum that I have no problems if Sharky decides to shift them to public BB )


It is near to impossible to beat efficient systems if you donot have enough understanding of intra day bushiness protocols and I can assure you no amount of technical or statistical analysis often mentioned on this BB can help you to make a correct and CONSISTENT ( 50 PLUS PERCENT ) trading decision ..

In my previous posts and certainly on the private BB I have enclosed enough documentary research and articles to support VWAP trading with numerous real time examples if you care to look for them .



Any question Pm me but I am afraid I wont be able to be quick on my replies as I am extremely busy ..

Grey1

PS:- ; I GIVE YOU A HOME WORK .. IF I WAS A CLIENT AND ASKED YOU AS MY BROKER TO TO BUY 10 000 SHARE OF GOOGLE BELOW VWAP TOMORROW .. HOW WOULD YOU EXECUTE THE TRADE? REMEMBER THE INSTRUCTION IS TO EXCUTE THE TRADE BELOW VWAP . ( THIS IS AN EXAMPLE OF EVERY DAYS SAMPLE INSTRUCTIONS GIVEN TO THE BROKER PRE MARKET BY INSTITUTIONAL PLAYERS )


YOU HAVE FEW CHOICES

1) TELL HIM YOU CANNOT AND LOSE BUSINESS
2) LOOK AT YOUR RSI, CCI, VOLUME, PRICE ANALYSIS, MACRO , MICRO , GOD KNOWS ALL KINDA PAY PER VIEW ANALYSIS OFTEN MENTIONED BY THE SO CALLED COACHES TO ENTER THE TRADE
3) OR FINALLY EXECUTE THE TRADE WITH OUT ANY PLAN AND SEE WHAT HAPPENS


A PROFITABLE TRADER MUST THINKS LIKE A BUSINESS MAN. .. THERE FOR HE NEEDS A BENCH MARK... AN OBJECTIVE BENCH MARK

 

[Whale Song]

Grey1 thanks for your response. Based on my opening post on this subject it seems the thread you moderate focuses on exactly the information I'd like to be discussing with other traders.

The "trading as a business" approach is all too often missed. Systems and methodologies, even VWAP itself are less effective without a sound overall approach to trading as a business and the right mental attitude of the person doing the actual trading.

Answer to homework: I'd buy GOOG whenever it was within lowest 10% of distance between VWAP and lower VWAP and only as many as were at inside or to max depth of 5c. No point getting greedy. (proviso) The price/volume action would have to justify taking the position(s). If there was no clear intent or support at your level, you'd hold off and wait for indications of support, or wait for the blowoff.

I don't trade GOOG as it's price is outside my stock selection criteria, but looking at Friday's action it would have been tough to hold your buying until you got a clear shot. I guess that's where the mental stamina bit comes into it. As an independent trader, you don't have to take the trade. As an institutional trader you don't have to take the trade, but you have far less options. LOL. A steady nerve. I haven't pulled up the VWAP plot for GOOG on Friday but I'm guessing the strategy I suggest above (buy when in lowest 10% of VWAP to Lower VWAP) would have started to manifest around 15:00 EST. Volume shows there were plenty looking to sell.

I don't know if this thread is going to develop VWAP discussion further or if the thread you mention will be made public, but I'm certainly keen to play around with VWAP.

 

[Grey1]

Grey1 thanks for your response. Based on my opening post on this subject it seems the thread you moderate focuses on exactly the information I'd like to be discussing with other traders.

The "trading as a business" approach is all too often missed. Systems and methodologies, even VWAP itself are less effective without a sound overall approach to trading as a business and the right mental attitude of the person doing the actual trading.

Answer to homework: I'd buy GOOG whenever it was within lowest 10% of distance between VWAP and lower VWAP and only as many as were at inside or to max depth of 5c. No point getting greedy. (proviso) The price/volume action would have to justify taking the position(s). If there was no clear intent or support at your level, you'd hold off and wait for indications of support, or wait for the blowoff.

I don't trade GOOG as it's price is outside my stock selection criteria, but looking at Friday's action it would have been tough to hold your buying until you got a clear shot. I guess that's where the mental stamina bit comes into it. As an independent trader, you don't have to take the trade. As an institutional trader you don't have to take the trade, but you have far less options. LOL. A steady nerve. I haven't pulled up the VWAP plot for GOOG on Friday but I'm guessing the strategy I suggest above (buy when in lowest 10% of VWAP to Lower VWAP) would have started to manifest around 15:00 EST. Volume shows there were plenty looking to sell.

I don't know if this thread is going to develop VWAP discussion further or if the thread you mention will be made public, but I'm certainly keen to play around with VWAP.

Song ,

Thanks for your reply. I have asked sharky to open the private BB to public so people can have access to more information on vwap trading .

To answer the home work .,,, you would not be able to buy 10 000 shares in one go ( the price you are given even if it executed @ market would be an average price way above the market. and if not careful you end up with way above the VWAP )... you need to play a game of poker to hide your buying intention to lower the price well under the VWAP and buy in a steps of say 1000's on the way down to give you an average price below VWAP to fulfill your commitment to your client ... This is how this game is played every day .

Now , you as a trader should never trade around VWAP .. you wait till VWAP ENGINES ( these are software written for institutional brokers. I have an article on VWAP engines if you interested email me ) ) to stamp the price down to what I have called MPD levels before you think of opening a position ... This is how you should do business with the market .

My intention is to change our trader's mind set to ignore moving averages , RSI , CCI and many chart patterns ( not all ) and encourage them to understand trading as a business and not as a set of technical or statistical rules or patterns that one MUST understand before making $$$ in the market. Therefore you really donot need to be a fully trained technician to make money .. In fact most qualified technicians donot make money any way and if they claim they do get them to a CHAT ROOM of their choice and get them to trade live .

Makes me laugh when reputable technicians and fund managers on CNBC base their arguments on 200 days Moving averages as bench mark for opening position for their clients.. No wonder they cannot outperform the index...

Grey 1 insists on traders to either use fundamentals for long term return or get real with trading as a business and donot fall for comments such as I just made $2 / share with reward risk 36:1 in 20 minute.. grrrrrrrrrrrrrrrrrrrrrrrrrrrrr


PS:--

(1)some brokers charge a fee for executing a trade below vwap ( large orders only )
( 2) Arbitrage trading is also possible using VWAP technique to minimise the risk due to overall market direction .. example ,,broker has two sets of instructions on two stocks .. one short , the other long hedged against each other.. Therefore the VWAP engines are set to trade the two positions against each other in case of market spike ..

 

[Sharky]

With kind permission from Grey1, I'm very pleased to be able to open the private 'Technical Trader' forum up for public consumption.

You can access the forum from the usual forum overvierw page under the 'Members' Boards' category, or directly here:
http://www.trade2win.com/boards/forumdisplay.php?f=85

 

[LevII]

With kind permission from Grey1, I'm very pleased to be able to open the private 'Technical Trader' forum up for public consumption.

You can access the forum from the usual forum overvierw page under the 'Members' Boards' category, or directly here:
http://www.trade2win.com/boards/forumdisplay.php?f=85

G1,

If S*cr*t*s or any of the usual spoilers turn up to ruin the forum I, for one, would be grateful if you will have the management re-close this jewell to public consumption.

Any other original members / contributors have a view?

Regards

LII

 

[dbphoenix]

G1,

If S*cr*t*s or any of the usual spoilers turn up to ruin the forum I, for one, would be grateful if you will have the management re-close this jewell to public consumption.

Any other original members / contributors have a view?

Regards

LII

As the forum "owner", Grey1 has certain privileges. If those are somehow altered, he remains a moderator. Therefore, if you note any problems, contacting him directly might result in quicker action than taking the usual routes.