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The horizontal green line is drawn across the low of the most recent "value area". That value area is represented by the vertical black line that borders the front of the market profile. As the market hopefully moves away from today's value (VWAP) to probe trader interest at higher levels, previous value areas pose a natural resistance area.
The slope of the VWAP has now gone from negative to flat ( horizontal), which indicates the market is in a trading range (consolidating). The market should trade evenly above and below the VWAP with support at the -1SD and resistance at the +1SD. Time of day dictates that is a trading affair for now. We are looking for the slope of the VWAP to turn positive in the afternoon, with the market trading above the VWAP, and pullbacks to the VWAP to be bought on good volume. This is the hardest part of longer time frame trading - when you have +15 points in a trade, and the market pulls back on profit taking or short covering. This when the doubt about the soundness of your position starts to really creep in, and when its really important that you have confidence in your trading plan and adhere to it. Remain flexible however, if the market proves you wrong, get out. But if you are correct, add.
If I am allowed to jump in the discussion, on a weekly time frame, there is a virgin daily vwap to be gaped (same as virgin poc), which coincidently is at the same level as the weekly vwap.
Learning a lot following this thread so thank you to all participants.
One of the difficult things for me during "big" markets like we have had yesterday and today (as well as a couple days last week) is "re-calibrating" my stops and targets. The mechanical part of this is mostly straightforward, especially using price action-derived stops such as supertrend (atr-based) or "bar signals" ala al brooks. The problem comes from re-calibrating my own psychology to not get "freaked" when price moves against my position and not getting anxious and taking profits when I get what I would normally consider a good-sized profit.
I find that it is when I use the stops and targets I have found appropriate over time, I end up fouling up my win% (because of volatility stop-outs) and then not having big enough winners to make up for this even though my winners may be the "right" size based on my historical trading...
Anyway, thanks again for the market analysis.
surly
Seek freedom and become captive of your desires. Seek discipline and find your liberty. - Frank Herbert
I would also add timing - here's a yogi berra: "trading is half direction and half volatility. the rest is timing."
Interesting to consider how timing and volatility relate - if your timing is off and your volatility analysis is spot-on, that may save you. Whereas if your timing is ON but your volatility analysis is off, then can sink you...
Seek freedom and become captive of your desires. Seek discipline and find your liberty. - Frank Herbert
