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Just jumping into this forum and noticed this thread. I have heard so much about VWAP and the idea of it makes a lot of sense.
I am with interactive brokers and my Intraday or moving VWAP only has 3 lines, the VWAP then the high and the low set at 1SD. What are all the extra lines on yours ? Additional SDs?
Thanks for the charts , very interesting trades to look at. Going to go back and read some of your other replies above.
I am sure you have already gone back and read my earlier posts. I have laid out everything you need. However, I am not familiar with IB, so I have no clue if more expansive VWAP indicators are available.
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- Trade what you see. Invest in what you believe -
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Canuck88 - I've had a quick look for you as I also use Interactive Brokers but use NinjaTrader for charting. Looking at the charting from I.B. - You can add additional VWAP's and change the Standard Deviation values. Hope this helps !! Interactive Brokers - VWAP
Thanks Aregon! I appreciate you looking into this for me. I will get this set up tomorrow.
How do you like NT? I am returning to trading and will be lucky to make 1099 (lifetime membership price) this year in total because I have so much to learn. When did you decide to switch to NT?
I've been with NinjaTrader since 2003 when they first started - I haven't tried other platforms.
I'm quite happy with NT8 now - Why don't you download the free version of NinjaTrader 8 - You won't have access to their Orderflow tools and you can't trade from it but at least you can find out if it is to your liking.
Also support on this forum is second to none !!
You would need the paid version of NT8 with the Orderflow tools to access JonnyBoy's VWAP template that he posted earlier.
@JonnyBoy Thank you so much for sharing all of this information regarding VWAP. It's made me focus more on these types of setups more so to see where I can find trading opportunities, thank you!
I've attempted to setup my VWAP to a similar view as your but I feel I might be doing something wrong. Here is a chart from today's regular pit session with SD's +/- 1 thru 3. It seems the outer SD's don't fluctuate as drastically with price. I've setup my chart to display a 987 tick with 3 SD's. My platform might not allow the customization of the outer SD's? Attached is a screenshot, hoping we could compare!!
EDIT: I figured I'd also share a screenshot of the available VWAP settings (very limited) .. I'm wondering what "Permissible Deviation" would represent if you have any idea?
Okay, so this is my chart for today using NT8 standard Order Flow VWAP indicator on a 987 tick chart. It is different to yours as you can see below. Just bear in mind this is with my VWAP envelopes showing as well so just ignore those and look at VWAP and the SDs.
And then I got to thinking why it was so different. So, I played around and coded up a VWAP from scratch and I get this. As you can see below it exactly matches the NinjaTrader indicator.
So, I then changed the calculation method for VWAP and hey presto I get this, which exactly matches your chart.
The VWAP itself is correct. It is to do with the calculation that generates the standard deviation multiplier from the VWAP itself. I don't know what platform you are on, but the calculation IMO isn't correct.
The correct way to calculate the standard deviation is like this:
SD = √∑ (X - M) 2 / n - 1
I think they are just multiplying VWAP by itself which isn't the same as the standard deviation of it. It is late and my eyes are blurry looking at this but I'll dig some more tomorrow. If anybody else wants to jump in here please do!
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- Trade what you see. Invest in what you believe -
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@JonnyBoy, thank you for laying out in detail your VWAP set-ups.
Would you be willing to share the % of time T1, T2, T3, and SL is hit based on your trade history?
Given the size of the SL to Targets, which generally seem to be 1.0sd for SL, and 0.5sd, 0.75sd and 1.0sd for T1-T3 (if I follow correctly) it would seem you would need to have T3 winners at least 70% of the time to make this worthwhile, is that about right?
That is a fair question to ask but I don't know if I can give you a fair answer to it. In fact, the more I think about this the more I don't feel there is one, mainly because of the assumptions and context required to do it. If you are looking at the setups from a pure statistical / mathematical point of view, you a very likely correct with your 70%. However...
I'll share some of my metrics first and then aim to give a line of sight to them. I do have statistics for the T1 to T3 targets being reached, but I consider this data to be too valuable to my own trading to warrant sharing it.
Average win rate: 69.84%
Average win: $402.75
Average loss: -$295.95
Profit / Loss ratio: 1.36 Expectancy: 29.75%* (*my expectancy is actually higher than this. I have skewed it downwards to account for not being able to divide by zero on 100% winning days)
Although my average win rate is 69.84%, it doesn't mean the data supporting it is strictly due to the T1 to T3 targets being hit. I would consider this too much of a mechanical approach. There are so many factors and assumptions involved here that it will be impossible for me to give an answer that would satisfy the question, but I'll try to put some context around it.
Do I line up the T1 to T3 targets and wait for them to be to be tagged? No. Sometimes I close out all positions at T1. Sometimes I only get T1 and the remainder comes off at break even. Sometimes I only get T1 and stopped on the remainder. Sometimes I get stopped out on all. Sometimes I move out the T3 target and catch a really large move. Most of the time I take off 50% of my position at T1 and then tighten my stop. Sometimes I tighten my stop to equal the profit I just made at T1, sometimes I move it to break even instead. And sometimes I will skip a VWAP setup altogether. Sometimes I'll skip 2 in a row.
With enough metrics collected you can determine the types of days when removing everything at T1 is the highest probability trade and days when you should let a T3 run. This is what I consider to be my edge. All of this can be discovered if you have the patience and time to do so. Harvesting metrics and probabilities is part of our job. What I mean by that is something like this;
So you can determine that on an "X"' type of day the VWAP TEST LONG SETUP has a x% probability of reaching T1, T2 and T3 and an x% probability of the +SD 2 and +SD 3 being reached. That kind of thing.
If you mechanically took every VWAP setup just because it was a "setup" then I think you will be disappointed with the results. However, if you provide yourself a basis as to the best time and reasoning to take them, trading can end up being the best job in the world.
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- Trade what you see. Invest in what you believe -
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Man...thank you for all that! It definitely is calculating everything completely differently. As you said it appears it is just multiplying VWAP by itself. And putting bands +1, +2, +3, etc out there with no "variance"..
I played around with another setting called "Maximum Permissible Deviation (MPD)" .. they say "MPD is similar to the standard deviation but is calculated as (VWAP period high - VWAP period low)/2." Here's what I get for yesterday's action with 987 tick... MUCH closer but still off I believe.
My platform is Quantower, not very customizable to specific needs but it gets the job done. I've been doing some testing around Sierra Chart and feel it is 100% superior. However, I've come across some issues with VWAP in Sierra Chart that is putting me off. I really appreciate you sharing these setups.. I've included VWAP in all my charts previously but this really inspires me to dive deeper into this as it really really fits my trading style. I'm doing my best to form strategies the best I can so I know what boxes to check off prior to taking a trade.
