So I want to start looking at the VWAP and PVP again, particularly for trading SPOT currencies.
The VWAP is a calculation that involves volume and so does the PVP.
In creating these indies from scratch before, I have used both the volume calculation, and something using only price.
E.g., VWAP at time 10(tenth bar for example) is: (p10*v10)/summation of v1+v2....+v10
I've created similar calculation of sort of a PWAP(i dunno if thats a real thing), but a price-weighted-Average-Price.... Here I just substituted the range of the bar in place of volume.
A calc of that at bar 10 might be: (p10*(high of current bar-low of current bar)) / summation( (h-l)1 + (h-l)2 .... +(h-l)10.
I hope that explanation makes sense, but in the end, it creates visually, a similar type of curve. An example of that can be seen HERE.
Of course one could use the standard volume calcs, and just get whatever you get by the spot volume reported by your broker?
So that's it, no real specific questions, but looking for opinions on what you guys think of using volume-specific tools on SPOT FX, or substituting price or time driven derivatives of the typical VWAP or PVP calculation for this purpose.
THanks.
The following 2 users say Thank You to forrestang for this post:
No, because there's no central exchange and many brokers simply get a price feed and then manage their own book of retail clients which is a tiny tiny fraction of the actual volume. What forestang is suggesting is using price range as a proxy for volume in the VWAP calculation.
I'm not familiar with the PVP methodology for calculating a moving average, but one case where there might be a significant divergence between the two calculations is during news events when there is a liquidity void coupled with a large range.
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If curious... here is what the typical VWAP and PVP tools look like using whatever volume is being reported from my broker. This is what is represented on the 6 charts on the left. Again, these are the normal volume calculations from my broker.
The image on the right, is the EU chart, using a VWAP that was calculated using a price-only calculation. You can compare/contrast this chart to the same EU chart on the left side, in the top right corner. 2020-12-28_090843
The following user says Thank You to forrestang for this post:
Lately I've been fan of utilizing Highs and Lows to anchor VWAP's and draw them, I've not made any specific rules yet but I've come to know that its a good way to manage your trades, especially since price tends to play around those areas, its also indication of market sentiment shift if one crosses another.
I originally came across this on FIO only, don't remember where and who had posted charts but that was the reference point and what I'm talking about here is one of its many possible forks.
Observe the subtle change in volume bias in vwap, especially in "gray candle areas", that gray candle represents "indecisive or low volume" areas, so I'm right now focusing on spotting them and spotting this subtle change.
Just throwing out idea there, I'm sure you will come up with your own variations.
What makes this interesting is because this could be more useful in 24x7 or forex markets, even if you get broker only volume data, it should at least tell you bias even if its limited to whatever that's available.
Please note that chart is not FX related, its just example, I don't really trade FX, there are better lucrative opportunities in equity index.
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