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VWAP for stock index futures trading?


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VWAP for stock index futures trading?

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  #101 (permalink)
 Silvester17 
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there're indeed countless ways to use a vwap:

- daily
- weekly
- monthly
- bimonthly
- quarterly
- annually
- rolling vwap
- anchored vwap
- rth
- eth
- just vwap
- midlines (bands)
- contraction / expansion display of bands
- etc

also to keep in mind, the vwap should show more or less the same value on all timeframes. the bands on the other hand could show rather big differences depending on timeframe and volatility. that of course has a lot to do with how and especially who programmed the indicator

btw a good thread about the vwap is here:




a couple of examples: (now I can test the new "drag and drop" feature for files)

- 5 day rolling vwap (no bands)

File: 5day.png:



- an anchored vwap to the last bigger swing low with contraction / expansion of the bands

File: expan.png:

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  #102 (permalink)
 Volt 
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I'm not a vwap pro but shouldn't your last two conditions be switched around....? If price is trading below VWAP and beyond -1st SD you can expect price to continue trading down.....not oscillate around vwap.....not sure if I have that correct but wouldn't want anyone to be messed up by the typo if it is one....thanks...perhaps you can clarify that for us please
JonnyBoy View Post
Here is the chart for the first hour or so on ES today. These are just simple setups. Remember this is on my own data series as time based data series just didn't do it for me.

Having said that, it doesn't mean you won't get caught out intrabar thinking a setup has begun when it hasn't, but in general;

- if price is trading above VWAP and beyond +1st SD you can expect price to continue up trending
- if price is trading between VWAP and +1st SD you can expect price to oscillate around VWAP
- if price is trading between VWAP and -1st SD you can expect price to continue down trending
- if price is trading below VWAP and beyond -1st SD you can expect price to oscillate around VWAP


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  #103 (permalink)
 JonnyBoy 
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Volt View Post
I'm not a vwap pro but shouldn't your last two conditions be switched around....? If price is trading below VWAP and beyond -1st SD you can expect price to continue trading down.....not oscillate around vwap.....not sure if I have that correct but wouldn't want anyone to be messed up by the typo if it is one....thanks...perhaps you can clarify that for us please

Good catch. You are correct about the typo!

It should read:

- if price is trading above VWAP and beyond +1st SD you can expect price to continue up trending
- if price is trading between VWAP and +1st SD you can expect price to oscillate around VWAP
- if price is trading between VWAP and -1st SD you can expect price to oscillate around VWAP
- if price is trading below VWAP and beyond -1st SD you can expect price to continue down trending

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  #104 (permalink)
 jakobe 
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JonnyBoy View Post
There are plenty of “trading” videos on YouTube about VWAP, but most, if not all of them are useless. This also includes the hundreds of websites and forums that essentially just repeat the same thing. Much of it is click bait. None of it is informative.

In short, there are very few worthwhile sources regarding VWAP.

I have a suite of VWAP setups, but you need to discover these for yourself. This means hundreds, if not thousands of hours spent in front of your chart not looking at anything else.

This is the chart from yesterday. The setups are obvious (to me anyway), but in hindsight it's easy to say that. The skill is to be able to recognise them in real time.

Oh and one more very important note. Never, ever pay anybody a dime to learn about VWAP. Anybody selling information about trading VWAP IMO is out for one thing, your money.


Hey Jonny,

I messed around with my charting platform (quantower) attempting to get my vwap similar to yours. I've gotten it close but still the vwap SD +1,+2,+3 aren't plotting the same. I spent about 30 mins messing with it then I realized at the top of your chart it indicates you have OrderFlow VWAP. *facepalm* .. is that something slightly different then traditional VWAP?

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  #105 (permalink)
 JonnyBoy 
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jakobe View Post
Hey Jonny,

I messed around with my charting platform (quantower) attempting to get my vwap similar to yours. I've gotten it close but still the vwap SD +1,+2,+3 aren't plotting the same. I spent about 30 mins messing with it then I realized at the top of your chart it indicates you have OrderFlow VWAP. *facepalm* .. is that something slightly different then traditional VWAP?

Orderflow VWAP is just NinjaTrader's name for VWAP. In general VWAP is VWAP but depending on the resolution calculated you might get slightly different results. As an example here is my chart from yesterday.

The chart below is my "standard" setup. VWAP (and therefore the standard deviation multipliers of) are calculated on a 1 tick time frame based on my input series. This is the most accurate method to calculate. I have also added a 0.25 standard deviation band/envelope around the VWAP and SDs


The chart below is VWAP (and therefore the standard deviation multipliers of) calculated using 'standard' resolution, which essentially means it calculates based on my input series. Even though my data series is bespoke, it's underlying tick resolution is 987, which means it is calculating less often and isn't as accurate.


In the chart below I have overlaid the 'standard' resolution of VWAP with the 'tick' resolution of VWAP. The VWAP itself is pretty accurate, but the blue lines (standard deviations of) are not matching.


In the chart below I have overlaid the 'tick' resolution of VWAP with my "standard'' setup. As you can see it matches perfectly.


So other than resolution of calculation, you just need a 1x, 2x and 3x multiplier of VWAP and it should look the same.

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  #106 (permalink)
 JonnyBoy 
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JonnyBoy's reasonably definitive guide to VWAP - Part One

Introduction
There are very few worthwhile sources out there regarding VWAP. I have seen many YouTube videos and forum posts about VWAP, but none that really get down to brass tacks of how to trade it. I, therefore, will attempt to turn the subject of VWAP into a non-complex, digestible format across a number of parts.

My aim is to convey some VWAP setups that you can continue to study on your own. However, these setups are not a magic wand, nor a silver bullet. These setups won’t turn your trading around overnight, but, with lots of additional study and a little chart patience you should be able to successfully add these as another tool into your trading arsenal.

What is VWAP?
Simply put, the VWAP of a stock or future over a specified market period is simply this; the average price paid per share or contract during a defined period. To frame another way, it is the price of each transaction in the market as weighted by its volume.

In VWAP trading, traders attempt to buy or sell a fixed number of shares at a price that closely tracks or is better than VWAP. Very large institutional trades constitute one of the main motivations behind VWAP activity. In other words, the institutions are using VWAP to assess or benchmark how well their traders are executing transactions.

VWAP is constant. Moving averages are not.
Although VWAP is still a moving average of sorts, it is the only moving average that isn’t void of gaps. There is only one intraday VWAP which will look identical on a 30 second chart or a 4-hour chart. An RTH VWAP calculation remains constant and therefore VWAP remains the same no matter how granular your chart is.

On the contrary, we have all applied ‘stock’ moving averages to our chart, whether it be a 10 EMA, 20 SMA or a 30 HMA. Essentially, the calculation for these moving averages only looks back by the fixed period you tell it to and of course has a different calculation to VWAP. My point being that a 10 SMA will only look back 10 bars and therefore it will add all the prices together from the last 10 bars and divide them by 10. Meaning, you only have a picture from the period you selected, and it will look different across alternate time periods. ‘Stock’ moving average indicators are not constant.

An RTH VWAP encompasses the entire trading period and takes the total amount of money transacted divided by the total amount of volume that traded over the same period. VWAP is the true average price plotted over time. Most commonly the entirety of the trading day. There are many uses for VWAP; anchoring a VWAP to a swing high or swing low, using anchored VWAPs as channels, using the weekly, monthly or yearly VWAP - but let's start this guide off with the basic setups and see where we go.

Part 2 will talk about setting up your chart. I will post Part 2 within the next few days or so.

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  #107 (permalink)
 JonnyBoy 
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JonnyBoy's reasonably definitive guide to VWAP - Part Two

Setting up your chart
My platform of choice is NinjaTrader 8. Therefore, I am including my VWAP chart template as part of this post but I will walk us through this chart below. For those traders who use alternate trading platforms I am sure you can find a way to replicate. If you do not own a lifetime license of NT8, the chart template will not work for you because you don't have access to the Order Flow VWAP indicator. You will need an alternate way to do this or perhaps code a simple indicator yourself.

What data series should I use?
I created a customised data series based on tick data. I am not including this for two reasons. First, it was custom built by me and it took a lot of work to get it exactly how I wanted it to perform. Second, the data series is personal to every trader. What works sublime for me might be a nightmare for you. However, I must stress that the choice of data series is very important with respect to the setups and therefore will take some discovery by you to get something that feels right. This will start to make sense once you see the VWAP setups in part 3.

Walking through the chart
Below is my chart. The only indicator attached to this chart is the NinjaTrader Order Flow VWAP indicator (which is provided only for NT users who hold a lifetime license). Like many stock indicators, I had to load a number of instances of the VWAP indicator and manipulate it to get it to display what I needed. Sure, I could code, it but for now let's just use the stock indicator. Please note that VWAP is being calculated with 1 tick resolution. Refer to my post above for the notable differences between VWAP calculated with a 1 tick resolution vs. the data series resolution, or click the post link below.



VWAP on the chart
RTH VWAP is displayed as the green and red dot-dashed line in the centre of the chart.
ETH VWAP is displayed as the dodger blue and magenta dot-dashed line.
+1, +2 +3 and -1, -2 and -3 standard deviations (positive and negative multipliers of VWAP essentially)

The VWAP bands
VWAP and each standard deviation of VWAP (except for the ETH VWAP) have been "banded" with a +0.25 and -0.25 deviation envelope. These bands are critical, as they play into the setups that will be in Part 3.

VWAP Chase Band
The yellow hashed lines are what I have named the VWAP Chase Band. These hashed lines are located at +0.5 and -0.5 of VWAP and play a roll in some of the RTH VWAP setups. Essentially, you don't want to take a VWAP trade if price is beyond these lines. To frame another way, they can help you to avoid chasing a VWAP entry.

Part 3 will talk about the various VWAP setups. I might have to break this into a number of parts as I don't know how granular I will need to get.


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Attached Files
Register to download File Type: xml @JonnyBoy VWAP Template.xml (70.3 KB, 219 views)
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  #108 (permalink)
 JonnyBoy 
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JonnyBoy's reasonably definitive guide to VWAP - Part Three

VWAP TEST LONG SETUP

The following example is picture perfect and should be considered in a TRENDING environment. By that I mean all of the boxes were ticked in terms of this particular setup. However, as we all know even at the best of times trading is like walking around in a grey fog. There will still be valid setups that don't tick all of these boxes but are still good trades to take. Conversely, there will be times when all of the boxes are ticked but the trade just doesn't work out. You need to spend time in front of your chart analysing this and working through all of the nuances and paths that price can take around VWAP. As I have stated earlier, this isn't a silver bullet.

The VWAP TEST SHORT SETUP is directly opposite to this. Part 4 will be another TRENDING setup which looks at standard deviation continuation. Part 5 will be a standard deviation reversion setup (COUNTER TREND) and part 6 will be the VWAP cross (COUNTER TREND).

VWAP SLOPE: The slope of VWAP ideally should be sloping upwards. NinjaTrader can be customised to show positive VWAP slope in green and negative VWAP slope in red. However, a flat VWAP with little to no slope (coloured red or green) will very likely be the ‘norm’.

SETUP: Ideally, price should transition from +SD1 to VWAP (or at least come from within the +SD1 ‘’band’’) and settle within the +/- 0.25 SD of VWAP (shown here in purple). A touch of VWAP is IDEAL, but doesn’t always happen. If however price traverses more than -0.25 below VWAP, this long setup should be ignored. This doesn’t mean price won’t break back up through VWAP, but rules are rules.

ENTRY: Place a BUY STOP within the BUY ZONE. This essentially means somewhere between +SD 0.25 and +SD 0.5 and inside the VWAP Chase Band (yellow hashed line). Don’t chase your entry beyond this line.

STOP: Place your STOP within the STOP ZONE, somewhere between -SD 0.25 and -SD 0.5. Essentially the width of your stop is 1.0 SD from your entry. If you want a tighter stop use 0.5 SD from your entry.

TARGET: You can start to take off your position at T1, T2 and T3 which is essentially +SD 1 and the ‘’band’’ surrounding it. If you are still holding a position you can always trail your stop with an aim to capture a breakout. In this instance you should trail you stop with either a 0.5 or 1.0 standard deviation stop width.

BREAK EVEN: Depending on the risk tolerance of the trader you will have to determine when you move your position to break even. In some instances, price won’t make it past T1 or T2, so trade according to your risk.


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  #109 (permalink)
 JonnyBoy 
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JonnyBoy's reasonably definitive guide to VWAP - Part Four

STANDARD DEVIATION CONTINUTATION LONG SETUP

The following examples are picture perfect and should be considered in a STRONG TRENDING environment. By that I mean all of the boxes were ticked in terms of this particular setup. However, as we all know even at the best of times trading is like walking around in a grey fog. There will still be valid setups that don't tick all of these boxes but are still good trades to take. Conversely, there will be times when all of the boxes are ticked but the trade just doesn't work out. You need to spend time in front of your chart analysing this and working through all of the nuances and paths that price can take around +SD 1. As I have stated earlier, this isn't a silver bullet.

The STANDARD DEVIATION CONTINUTATION SHORT SETUP is directly opposite to this. Part 5 will be a standard deviation reversion setup (COUNTER TREND) and part 6 will be the VWAP cross setup (COUNTER TREND).

VWAP SLOPE: The slope of VWAP ideally should be sloping upwards. NinjaTrader can be customised to show positive VWAP slope in green and negative VWAP slope in red. A reasonably good slope is recommended in this case.

SETUP: Ideally, price should transition from +SD 2 to +SD 1 (or at least come from within the +SD2 ‘’band’’) and settle within the +/- 0.25 SD of +SD 1. A touch of +SD 1 is IDEAL, but doesn’t always happen. If however price traverses more than -0.25 below +SD 1, this long continuation setup should be ignored. This doesn’t mean price won’t break back up through +SD 1, but rules are rules.

ENTRY: Place a BUY STOP within the BUY ZONE. This essentially means somewhere between +SD 1.25 and +SD 1.5. You can add Chase Bands (similar to the ones straddling VWAP) to help you with this although these are not shown in this example. I usually gauge this by eye. Close is usually close enough.

STOP: Place your STOP within the STOP ZONE, somewhere between +SD 0.5 and +SD 0.75. Essentially the width of your stop is 1.0 SD from your entry. If you want a tighter stop use 0.5 SD from your entry.

TARGET: You can start to take off your position at T1, T2 and T3 which is essentially +SD 2 and the ‘’band’’ surrounding it. If you are still holding a position you can always trail your stop with an aim to capture a breakout. In this instance you should trail you stop with either a 0.5 or 1.0 standard deviation stop width.

BREAK EVEN: Depending on the risk tolerance of the trader you will have to determine when you move your position to break even. In some instances, price won’t make it past T1 or T2, so trade according to your risk.

ALTERNATE USE: This same setup can be replicated when price transitions from +SD 3 to +SD 2, but typically in these instances price is usually quite extended. This should only be considered on very strong trend days.


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  #110 (permalink)
 JonnyBoy 
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JonnyBoy's reasonably definitive guide to VWAP - Part Five

STANDARD DEVIATION REVERSION TO VWAP SHORT SETUP

The following example is picture perfect and should be considered in a COUNTER TRENDING environment. By that I mean all of the boxes were ticked in terms of this particular setup. However, as we all know even at the best of times trading is like walking around in a grey fog. There will still be valid setups that don't tick all of these boxes but are still good trades to take. Conversely, there will be times when all of the boxes are ticked but the trade just doesn't work out. You need to spend time in front of your chart analysing this and working through all of the nuances and paths that price can take around +SD 1 to VWAP. As I have stated earlier, this isn't a silver bullet.

The STANDARD DEVIATION REVERSION TO VWAP LONG SETUP is directly opposite to this. Part 6 be the VWAP cross setup (COUNTER TREND).

VWAP SLOPE: The slope of VWAP ideally should be flat, but this will be rare. Typically, a very mild slope is present. However, it should start to flatten out as price transcends from +SD 1 to VWAP.

SETUP: Ideally, price should transition from VWAP to +SD 1 to VWAP. A initial touch of +SD 1 is IDEAL, but doesn’t always happen. If however price traverses more than +0.25 above +SD 1, this short setup should be ignored. This doesn’t mean price won’t break back down towards VWAP, but rules are rules.

ENTRY: Place a SELL STOP within the SELL ZONE. This essentially means somewhere between +SD 0.5 and +SD 0.75 and just outside the VWAP Chase Band (yellow hashed line).

STOP: Place your STOP within the STOP ZONE, somewhere between +SD 1.25 and +SD 1.5. Essentially the width of your stop is 1.0 SD from your entry. If you want a tighter stop use 0.5 SD from your entry.

TARGET: VWAP is the only target in this instance. At this point we don’t know if a VWAP TEST is imminent of if this will turn into a VWAP CROSS (a cross meaning control has switched from buyers to sellers). Keeping a small position open will allow you to wait and see what transpires.

BREAK EVEN: Depending on the risk tolerance of the trader you will have to determine when you move your position to break even. In some instances, price won’t make it to T1 so trade according to your risk.


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  #111 (permalink)
 JonnyBoy 
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JonnyBoy's reasonably definitive guide to VWAP - Part Six

VWAP CROSS SHORT SETUP

The following example is picture perfect and should be considered in a COUNTER TRENDING environment. By that I mean all of the boxes were ticked in terms of this particular setup. However, as we all know even at the best of times trading is like walking around in a grey fog. There will still be valid setups that don't tick all of these boxes but are still good trades to take. Conversely, there will be times when all of the boxes are ticked but the trade just doesn't work out. You need to spend time in front of your chart analysing this and working through all of the nuances and paths that price can take around VWAP to +SD 1 TO VWAP. As I have stated earlier, this isn't a silver bullet.

VWAP SLOPE: The slope of VWAP ideally should be flat or extremely mild. It should start to slope in your direction as price transcends from VWAP to –SD 1.

SETUP: Ideally, price should transition from VWAP to +SD 1 to VWAP. A initial touch of +SD 1 is IDEAL, but doesn’t always happen. If however price traverses more than +0.25 above +SD 1, this short setup should be ignored. This doesn’t mean price won’t break back down towards VWAP, but rules are rules.

ENTRY: Place a SELL STOP within the SELL ZONE. This essentially means somewhere between -SD 0.25 and -SD 0.5 and inside the VWAP Chase Band (yellow hashed line). Don’t chase your entry beyond this line.

STOP: Place your STOP within the STOP ZONE, somewhere between +SD 0.25 and +SD 0.5. Essentially the width of your stop is 1.0 SD from your entry. If you want a tighter stop use 0.5 SD from your entry.

TARGET: You can start to take off your position at T1, T2 and T3 which is essentially -SD 1 and the ‘’band’’ surrounding it. If you are still holding a position you can always trail your stop with an aim to capture a breakout. In this instance you should trail you stop with either a 0.5 or 1.0 standard deviation stop width.

BREAK EVEN: Depending on the risk tolerance of the trader you will have to determine when you move your position to break even. In some instances, price won’t make it past T1 or T2, so trade according to your risk.


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 JonnyBoy 
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JonnyBoy's reasonably definitive guide to VWAP - Summary Of Initial Setups

Before I move on and show some more advanced VWAP setups, let's spend a little time contextualising the setups already discussed.

First, let's take a look at the first 2 hours of trading for the 18th April, 2020 on the ES and the setups relating to VWAP that unfolded. I have added some small triangles to identify entries and exists that should have been considered, but you might have to zoom in to see them. The only indicator you see here is RTH VWAP and its standard deviation(s).



What must be understood is that identifying retrospective VWAP setups (and any kind of retrospective setup) is easy. The skill and effort required by the trader is to start recognising these setups as they unfold in real time. It isn't easy and requires lots of screen time, but what I am showing here is a bona fide way to make a living as a trader. Yes, you heard that correctly. You can make a living trading these VWAP setups.

The first step to understanding these VWAP setups is to load as many days of chart history as you can, 60, 90, 180+ days. Slowly work you way through each chart. Track the price movement (open, close, high and lows of every bar) and manually identify every VWAP setup you see. The first 30 mins of any trading day using VWAP can be quite tricky because VWAP typically hasn't had much time to develop, but still identify these. Once you get to the stage where you can identify these setups by a quick glance of your chart, you should then transition to watching the chart unfold live.

The idea is to look at the charts and ask yourself, what is price trying to do and is it doing a good job of doing it.

As I have suggested in prior posts, stocks appear to "behave'' much more in alignment to the setups shown. And the bonus is you have many high liquid sticks to choose from, so a VWAP setup is never far away. Futures are a little trickier but with time they can be VWAP tamed.

Will every setup work out? No! Of course not. You'll take losing trades. In the beginning that is all you might take as you begin to mentally deconstruct what price is trying to do when it gets into these key areas and forward construct what it might do. My mantra has always been this. Study it. Feel it. Exhaust it.

On a basic level this is why trading VWAP helps you;

It helps identify a likely trend, counter trend or continuation of trend

- if price is trading above VWAP and beyond +1st SD you can expect price to continue up trending
- if price is trading between VWAP and +1st SD you can expect price to oscillate around VWAP
- if price is trading between VWAP and -1st SD you can expect price to oscillate around VWAP
- if price is trading below VWAP and beyond -1st SD you can expect price to continue down trending

It helps identify credible support and resistance levels

VWAP and the standard deviations of, are giving you real time support and resistance levels. The trouble with "regular'' support and resistance lines, whether drawn horizontally or diagonally as trend lines is this; they just don't work. There is a thread on FIO dedicated to the random line theory. Regular support and resistance lines, including trend lines fall into the category of a self fulfilling prophecy. With VWAP however, all the criteria not to fall into this trap is met.

No silver bullet exists anywhere in trading, but I would rather trade an institutionally recognised indicator than anything else. These are credible setups that limit your ability to impact the analysis, which is exactly what you want.

As for my trading, I trade 2 distinct methods. VWAP of course, plus my own customized algorithm that doesn't use VWAP in its calculations at all as it is based on decomposition theory. This may appear counter intuitive, but having two completely separate methods allows me a lot of flexibility in my trading.

Is VWAP for everybody? Of course not, but if you are looking to get a foothold in your trading and don't already have one, VWAP could be for you.

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 shzhning 
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It helps identify a likely trend, counter trend or continuation of trend

- if price is trading above VWAP and beyond +1st SD you can expect price to continue up trending
- if price is trading between VWAP and +1st SD you can expect price to oscillate around VWAP
- if price is trading between VWAP and -1st SD you can expect price to oscillate around VWAP
- if price is trading below VWAP and beyond -1st SD you can expect price to continue down trending

These are incredibly helpful. I do find it challenging when occasionally, price oscillates around 1st (-1st) SD - in other words, not in a trend, but not mean reversion (to VWAP) either. I wonder how you would trade these days. Thanks!

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 JonnyBoy 
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shzhning View Post
These are incredibly helpful. I do find it challenging when occasionally, price oscillates around 1st (-1st) SD - in other words, not in a trend, but not mean reversion (to VWAP) either. I wonder how you would trade these days. Thanks!

Indeed. There hasn't been many days with oscillations around VWAP recently on the ES! Large swings tend to open up VWAP and the SDs, so the envelope in which to work these entries becomes very large, which isn't always that favourable either.

However, on a brief look at my charts I found some short lived oscillation activity around VWAP that should give you an idea of what to look for. The key is that the T1 (target 1) was hit on the valid setups, so profit was achievable. However, with oscillation around VWAP you shouldn't be waiting for a large move. Short, sharp sweet entries is key. There is nothing wrong in removing everything off at T1 when price is oscillating, and perhaps just leaving a single contract as a runner with a break even stop. If you catch a break then great, if not then no big deal.

These are the little nuances you can be on the look out for. Weak touches of the +SD1 and -SD1 bands will likely be the name of the game here.


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 shzhning 
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Thanks for the quick response. I probably did not make myself clear though. I find it especially hard to trade when price chop around 1SD (or -1SD) , not VWAP. Like a few weeks ago on TN ultra note, price oscillate around 1SD for much of the day - it did not retrace and test VWAP, and no momentum to go beyond SD1. Neither trend nor mean reversion trade would be profitable (unless you're HFT or scalper). Any thoughts?


TN 3-27-2020

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 Aregon 
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I just wanted to express my appreciation for the time and effort you have afforded us all in putting together your Definitive Guide to VWAP Trading. I find it to be one of the most comprehensive and concise writings on the subject. I'd really appreciate if you could occasionally post a chart now and again highlighting particular VWAP setups to further our understanding of the subject !!
Many thanks !!

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 JonnyBoy 
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shzhning View Post
Thanks for the quick response. I probably did not make myself clear though. I find it especially hard to trade when price chop around 1SD (or -1SD) , not VWAP. Like a few weeks ago on TN ultra note, price oscillate around 1SD for much of the day - it did not retrace and test VWAP, and no momentum to go beyond SD1. Neither trend nor mean reversion trade would be profitable (unless you're HFT or scalper). Any thoughts?


TN 3-27-2020

I looked up the TN market for the same day. I am actually seeing something quite different with respect to VWAP vs. your chart. I identified a number of opportunities that respected the VWAP setups and I am seeing that price did in fact oscillate between VWAP, +1 SD, VWAP and -1 SD. Quite perfectly actually.

I was curious as to the differences but I figured it out. It appears you are starting your VWAP (and SDs) at the beginning of ETH and letting them continue into the RTH session. You should be starting a new VWAP (and SDs) at the beginning of RTH for the instrument you are trading. You can see my ETH VWAP on the same chart (the dodger blue dashed-dot line) matches the VWAP on your chart, which confirmed to me you were using the ETH VWAP.

I don't know your trading platform, so I don't know if you can select to start a new VWAP at the beginning of RTH. It is important to use RTH VWAP. You can keep the ETH VWAP on your chart for reference as this is still relevant as support/resistance. In fact, you can use the ETH VWAP SDs too, but these are often weak as they were created on much less volume than the RTH session, plus it isn't worth having so many lines causing confusion.

Failing not being able to customise an RTH VWAP on an ETH session, you can always have just an RTH session only.

I hope that helps.


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 makhan 
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Thank you JonnyBoy for your time, efforts and generosity.
In one of the posts you mentioned using Cumulative Delta with VWAP. I can see in the chart you posted in post#33 that there is CD on the chart; are you using BB on the cumulative delta and how are you using CD with VWAP?
Thanks in advance.
Makhan

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 JonnyBoy 
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Aregon View Post
I just wanted to express my appreciation for the time and effort you have afforded us all in putting together your Definitive Guide to VWAP Trading. I find it to be one of the most comprehensive and concise writings on the subject. I'd really appreciate if you could occasionally post a chart now and again highlighting particular VWAP setups to further our understanding of the subject !!
Many thanks !!

No problem! The only reason I posted was because I noticed a few vendors charging money for a VWAP course. I don't know what is in those courses so I can't necessarily comment, but paying for this stuff that doesn't involve anything proprietary is too much.

I will certainly look at posting some charts moving forward.

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 shzhning 
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@JonnyBoy

Thank you for your time and effort!

I do look at RTH as well. I use thinkorswim and 5 min chart. I remember 3/27 because I had a feeling TN is going up, but most of the move was made during night session before RTH, and then again right after 3PM. RTH session was so tight that sometimes one single 5 min bar would cover the whole range between VWAP and 1st SD. There's no room to for trade to develop.

Thanks again and enough for my rambling since this is a thread about index futures trading

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 JonnyBoy 
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Thank you JonnyBoy for your time, efforts and generosity.
In one of the posts you mentioned using Cumulative Delta with VWAP. I can see in the chart you posted in post#33 that there is CD on the chart; are you using BB on the cumulative delta and how are you using CD with VWAP?
Thanks in advance.
Makhan

The CD you see in that post was very likely to do with some data collection and perhaps some analysis. It was nearly a year ago now, so I can't recall what I was doing with it!

However, CD certainly has its use. If beginning to trade VWAP, a look into the underlying structure of the market could be helpful. Therefore, if you are going to incorporate CD in some form I would advise using an indicator that measures the momentum of the cumulative delta vs. the cumulative delta itself. If you are a lifetime NT8 user there is a great indicator that does this called irDeltaMomentumV2 - you can get it via the NT website via the link below.

https://ninjatraderecosystem.com/user-app-share-download/irdeltamomentumv2-indicator/

It can help clue you in to the underlying structure of the market gauging how much delta momentum there was behind each move and helping to spot divergence. The only reason I didn't include the suggestion of using CD in some form when trading VWAP is because it can give you false positives against valid VWAP trades. This causes indecision and a reason not to take a trade. Adding another layer into the decision making process is something to be avoided.

Personally, I don't think it is necessary to have CD on your chart. VWAP and Price Action has everything you need to discern an entry, or not. VWAP trading literally tells you if you are in oscillating chop / range or in a trend. And therefore you don't need CD for that.

I marked up some obvious divergences in the chart to show what this indicator can do.


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 PK2020 
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JonnyBoy,

Thank you for the superlative explanation of the VWAP. I am new to this forum and
am very impressed with the information and knowledge of the posters. Additionally, I am somewhat overwhelmed, in a good way, with the civility of the members. It is a great pleasure to see a group of people with a common interest discussing and imparting a very high level of knowledge
regarding a very difficult subject in such a courteous and respectful manner. I look forward to learning very much here and hope that I will be able to contribute something occasionally.
Stay well and happy trading to everyone.

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 JonnyBoy 
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shzhning View Post
@JonnyBoy

Thank you for your time and effort!

I do look at RTH as well. I use thinkorswim and 5 min chart. I remember 3/27 because I had a feeling TN is going up, but most of the move was made during night session before RTH, and then again right after 3PM. RTH session was so tight that sometimes one single 5 min bar would cover the whole range between VWAP and 1st SD. There's no room to for trade to develop.

Thanks again and enough for my rambling since this is a thread about index futures trading

No problem. It all comes under the umbrella of VWAP.

The data series of choice IMO is critical to trading VWAP. It took me a long, long time to design a data series that suited what I wanted to see. By definition I wanted to see obvious closes within the VWAP envelopes. Time based data series didn't allow me to do that and/or was wasn't as well defined.

The following 2 chart examples are for the same day. One is a 5 minute chart and one is my data series (well the first few hours anyway) which is based on tick. I have marked the VWAP test on both charts. The 5 min chart VWAP TEST SHORT is not as clear and obvious. I like to see definitive bar closes within the envelope(s), but as you say sometimes on a time based chart, the VWAP setup is over in a shorter time than the bar takes to close, therefore its definition is gone. I hope that makes sense.

Again, this is my opinion and it doesn't mean anybody is wrong, but I guess it comes down to preference.



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 JonnyBoy 
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JonnyBoy,

Thank you for the superlative explanation of the VWAP. I am new to this forum and
am very impressed with the information and knowledge of the posters. Additionally, I am somewhat overwhelmed, in a good way, with the civility of the members. It is a great pleasure to see a group of people with a common interest discussing and imparting a very high level of knowledge
regarding a very difficult subject in such a courteous and respectful manner. I look forward to learning very much here and hope that I will be able to contribute something occasionally.
Stay well and happy trading to everyone.

This is by far the most respectful and knowledgeable trading forum out there. There is no room for ego's. Threads can get a little heated sometimes but this is down to a passion for trading more than anything else!

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 mtzimmer1 
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JonnyBoy View Post
This is by far the most respectful and knowledgeable trading forum out there.



I can’t thank you enough for sharing this. I just pulled up the charts of a couple stocks I traded on Friday and was amazed to see just how effective the setups you’ve shared truly are. I will definitely be adding these tools to my arsenal. If you don’t mind, I’d like to tag you in my journal posts as I further explore these concepts and see if they work for me as a trader! Thanks Johnny!

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 JonnyBoy 
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I can’t thank you enough for sharing this. I just pulled up the charts of a couple stocks I traded on Friday and was amazed to see just how effective the setups you’ve shared truly are. I will definitely be adding these tools to my arsenal. If you don’t mind, I’d like to tag you in my journal posts as I further explore these concepts and see if they work for me as a trader! Thanks Johnny!

No problem. Tag away!

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 LastDino 
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Thank you @JonnyBoy, its very rare to see someone post their experience like this. I think this is the best feature of this forum.

I've one question though, I've read entire thread and it didn't really come up, but there is something little distant related to VWAP, its TWAP.

Some people use it in Cash Index (or simply anything that doesn't have volume data), I've also used TWAP+/- 1SD with fib divisions. It was interesting concept for mean reversion trades until you didn't hit the trend. Your VWAP guide has kind of spurred me back into looking at it again as option.

Have you tried it? If yes, would you consider it worth?

I'm taking this round about way because I actually can't use VWAP due to volume being not there and here options are only available on Cash underlying and not future so I have to track cash only.

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 JonnyBoy 
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LastDino View Post
Thank you @JonnyBoy, its very rare to see someone post their experience like this. I think this is the best feature of this forum.

I've one question though, I've read entire thread and it didn't really come up, but there is something little distant related to VWAP, its TWAP.

Some people use it in Cash Index (or simply anything that doesn't have volume data), I've also used TWAP+/- 1SD with fib divisions. It was interesting concept for mean reversion trades until you didn't hit the trend. Your VWAP guide has kind of spurred me back into looking at it again as option.

Have you tried it? If yes, would you consider it worth?

I'm taking this round about way because I actually can't use VWAP due to volume being not there and here options are only available on Cash underlying and not future so I have to track cash only.

I have not really looked into TWAP so I am not that familiar. I can certainly see using time instead of volume to execute (or even benchmark) against makes a lot of sense. I'll have to dig into it a bit more first. For non liquid markets I would imagine TWAP has some potential.

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 LastDino 
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I have not really looked into TWAP so I am not that familiar. I can certainly see using time instead of volume to execute (or even benchmark) against makes a lot of sense. I'll have to dig into it a bit more first. For non liquid markets I would imagine TWAP has some potential.

Thank you, it will certainly help.

Here is what I'm talking about, there are probably better ways to handle this tbh
web



Now that you have listed down how to trade VWAP, I need to write down all that and see this in new light as well. You were absolutely right in saying that you have probably the most straightforward VWAP guide out there.

/I hope I'm not going too much out of topic here. Thank you again ^^

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 JonnyBoy 
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VWAP Trading | April 20, 2020 | ES | Update on Targets

It was a challenge to pick out the VWAP trades today, but there were certainly some good setups.

One thing I need to note is that the T1, T2 and T3 profit targets should be moved to their respective price (around the standard deviation band) on the bar you made the entry on. To put another way, line up your profit targets at the standard deviation envelope lines / price at the time of entry, or you will be forever chasing them as they expand.

I have marked up the chart with triangles to show you what I mean.


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Canuck88
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JonnyBoy View Post
VWAP Trading | April 20, 2020 | ES | Update on Targets



It was challenge to pick out the VWAP trades today, but there were certainly some good setups.



One thing I need to note is that the T1, T2 and T3 profit targets should be moved to their respective price (around the standard deviation band) on the bar you made the entry on. To put another way, line up your profit targets at the standard deviation envelope lines / price at the time of entry, or you will be forever chasing them as they expand.



I have marked up the chart with triangles to show you what I mean.






Hey Jonny ,

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.


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 JonnyBoy 
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Canuck88 View Post
Hey Jonny ,

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.


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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.

Oh, and welcome to FIO!

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 Aregon 
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Canuck88 View Post
Hey Jonny ,

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.


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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

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Canuck88
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Aregon View Post
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?



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 Aregon 
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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.

The best of trading to you !!

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 jakobe 
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@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?

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 JonnyBoy 
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jakobe View Post
@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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  #138 (permalink)
 sixtyseven 
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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?

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 JonnyBoy 
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sixtyseven View Post
@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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 jakobe 
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JonnyBoy View Post
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!

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.

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 JonnyBoy 
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jakobe View Post
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.

That is much closer isn't it. I am not sure if the small discrepancies then come down the resolution of the VWAP calculation.

Traditionally, tick data is required to calculate VWAP values. While this provides the most precise VWAP calculation possible, it can also utilize extensive CPU resources. Therefore, your platform may calculate slightly differently (to save valuable computing time and resources) and calculate the VWAP on a bar-by-bar basis, hence calculating once per bar.

The conventional method of calculating VWAP values is to recalculate with each incoming tick of price data. I am just taking a guess here as I don't know for sure. I will also continue to dig around some more because I don't know why the platform would say it is a standard deviation of VWAP, when clearly it isn't. If you are sticking with that platform I would certainly ask them, but it sounds like you are looking to change.

I can't comment on SC, but I have also heard it is a superb platform as well. There are many threads devoted to it here on FIO. Many people have moved from NT to SC and love it.

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 jakobe 
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JonnyBoy View Post
That is much closer isn't it. I am not sure if the small discrepancies then come down the resolution of the VWAP calculation.

Traditionally, tick data is required to calculate VWAP values. While this provides the most precise VWAP calculation possible, it can also utilize extensive CPU resources. Therefore, your platform may calculate slightly differently (to save valuable computing time and resources) and calculate the VWAP on a bar-by-bar basis, hence calculating once per bar.

The conventional method of calculating VWAP values is to recalculate with each incoming tick of price data. I am just taking a guess here as I don't know for sure. I will also continue to dig around some more because I don't know why the platform would say it is a standard deviation of VWAP, when clearly it isn't. If you are sticking with that platform I would certainly ask them, but it sounds like you are looing to change.

I can't comment on SC, but I have also heard it is a superb platform as well. There are many threads devoted to it here on FIO. Many people have moved from NT to SC and love it.

Just from looking at my charts real-time I can confirm the VWAP and SD's are being calculated at the close of each 987 tick bar. My PC is definitely capable of utilizing tick data and calculating everything off tick for tick without suffering any performance issues. I'm fairly confident Quantower does not allow this feature unless I were to custom code something, which sadly, I am an uber noob at and not comfortable completing.

Considering the switch to Sierra. I really appreciate your time and helping the best you can. Once I feel I have everything setup correctly I'll drop some charts here again to compare.

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 sixtyseven 
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JonnyBoy View Post
Do I line up the T1 to T3 targets and wait for them to be to be tagged? No.
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.

It was a fair, and good answer to the question. Appreciate your time for the reply. Thanks.

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 jakobe 
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Alright @JonnyBoy, I think I've got this looking correctly and SD's charting correctly! Was able to fairly easily setup VWAP to calculate
Loaded up SC and have been setting everything up. Please take a look and share a snap shot of today's (4/30) session if you don't mind! Would like to compare.


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 JonnyBoy 
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jakobe View Post
Alright @JonnyBoy, I think I've got this looking correctly and SD's charting correctly! Was able to fairly easily setup VWAP to calculate
Loaded up SC and have been setting everything up. Please take a look and share a snap shot of today's (4/30) session if you don't mind! Would like to compare.


Your chart setup looks spot on to me.


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  #146 (permalink)
 Tuglife 
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I am very new to using the VWAP and I appreciate all the detail in this thread. Particularly from Jonnyboy. I do have one particular question though.

One can either trade toward the VWAP (mean reversion) or away from it (mean aversion?). What are some of the signals to guide in which direction to trade?

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 JonnyBoy 
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Tuglife View Post
I am very new to using the VWAP and I appreciate all the detail in this thread. Particularly from Jonnyboy. I do have one particular question though.

One can either trade toward the VWAP (mean reversion) or away from it (mean aversion?). What are some of the signals to guide in which direction to trade?

Although all of the VWAP setups are valid, they will not all work mechanically day in and day out. I have said this previously that you need to spend lots of time studying and gathering metrics as to best types of days (and what the preceding price action looks like) to execute each VWAP setup. Doing this increases their probability of working by some margin.

The VWAP test long and test short are the simplest and easiest VWAP setups to recognise. From memory I recall studying these for about 6 months non-stop. The best way I found to do this is was to record my screen, take chart snapshots and fill a PowerPoint with marked up charts of my observations. Note that reversion to VWAP is a trickier setup to determine and I wouldn't start there.

I see you also have Jigsaw. Putting my views on "Order Flow" trading aside, you could start looking at what price does when it approaches VWAP for a test and see if you can spot something in the underlying structure of the market that could determine a VWAP test failure, else you have a good setup to take.

And just to note, if you want to tag a user so they get notified, you need to put an @ in front of their name.

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  #148 (permalink)
 Tuglife 
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Thanks @JonnyBoy. OK sounds like I will be investing a lot of screentime in this.

Yes I have a Jigsaw DOM up while trading. The way I'm thinking about it now is that I'm looking for setups on the charted VWAP, and then refine the entries using the market profile, order flow.

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 motowater 
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The std deviation lines are important but not as important as the main VWAP.

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 JonnyBoy 
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motowater View Post
The std deviation lines are important but not as important as the main VWAP.

100% agreed!

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  #151 (permalink)
 Tuglife 
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The VWAP line itself gave a couple of solid long oportunities today. If my chart is set up correctly at 1:15 and 1:25 EST the ES bounced off of main VWAP to the tick.

Unfortunately I had already ruined my day and *missed* these opportunities.

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  #152 (permalink)
 JonnyBoy 
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Tuglife View Post
The VWAP line itself gave a couple of solid long oportunities today. If my chart is set up correctly at 1:15 and 1:25 EST the ES bounced off of main VWAP to the tick.

Unfortunately I had already ruined my day and *missed* these opportunities.

You are correct, although I was actually out of the market by that point because I had met my daily goal, ironically enough cashing in at VWAP. However, there were picture perfect VWAP TEST LONG SETUPS with virtually no heat shortly after that.

As for any missed opportunities in the market, don't sweat it. There will be lots more opportunities. The key is to ensure you stay in the game so you have a chance to play tomorrow.


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  #153 (permalink)
 Tuglife 
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@JonnyBoy Do you think the VWAP has significance in the ES ETH session? I am watching it and it looks like (for tonight's session anyways) the +1SD -1SD and VWAP are predictive for quite a few swings. Again, to the tick.

Why does it always look so easy on the left side of the chart?

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 JonnyBoy 
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Tuglife View Post
@JonnyBoy Do you think the VWAP has significance in the ES ETH session? I am watching it and it looks like (for tonight's session anyways) the +1SD -1SD and VWAP are predictive for quite a few swings. Again, to the tick.

Why does it always look so easy on the left side of the chart?

I start my ETH VWAP at the beginning of the CME Globex session, but I only very occasionally (less than 1% of the time) put any trades on during that session regardless of how good the VWAP setups may look. The Globex session data trades based on correlated spreads and does not have the 500 stocks trading for the ES at that time.

However, I do let the OVN VWAP roll into RTH and use it as a reference point. And really that is where it ends for me. Historically, going back 5 years or so I sucked at trading the OVN session, so one of my rules was to never trade it again. The OVN ES is notoriously thin and can catch you off guard very easily as it sweeps through price levels like butter. It should be noted though, I never traded VWAP back then. So, as for the validity of the ETH VWAP and accompanying SD bands I couldn't tell you with any level of confidence as I haven't studied it.

But, when you spot reoccurring things like this, you just have to exhaust the bejesus out of it until you have looked at every possible scenario. I would start off by collecting as much data as you can and go from there.

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  #155 (permalink)
 Tuglife 
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How would I start gathering VWAP probabilities for different market conditions?

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 JonnyBoy 
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Tuglife View Post
How would I start gathering VWAP probabilities for different market conditions?

Did you see my post here?



The approach below are the metrics I wanted to measure, but it may not be the same for you. Anyway, I started collecting data on:

Once you have this information, you can start to develop the probabilities of a particular VWAP setup working in your favour.

So, on an RTH open that has a gap down opening out of range with an open drive down, the probability that a VWAP TEST LONG setup reaching T1 is 23.7%* and the probability that a VWAP TEST SHORT setup reaching T1 is 84.7%* and so on.

* I completely made those percentages up, but gives you the idea of some framework in which to build around.

EDIT: If you go take a look @mtzimmer1 journal, you can see how he approaches the market. I haven't read his entire journal but he has a sound approach and is starting to incorporate some VWAP setups.

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 faithdefender 
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Fascinating to read, and I mean that sincerely. I just wish I could use it for Forex. I have the VWAP you mentioned and I played around with it, but I think it looks better on the ES chart.

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 yoyotrader1 
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Agree, it was amazingly spot on minus a few blips up, as at was coming down.
Any idea why it was so near-perfect? Large institutions getting on the train or what?

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  #159 (permalink)
 JonnyBoy 
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I have been getting a ton of PM requests about this so I thought I would try to cover all bases in this post.

The XML file I attached in a previous post was an NT8 Chart Template. It isn't the VWAP indicator! However, if you are a NinjaTrader Lifetime License holder you will be able to replicate my chart exactly by loading this chart template. How does this load the actual indicator? When the chart template is loaded, it will automatically call for the Order Flow VWAP indicator, but again only if you are a NinjaTrader Lifetime License holder.

You can follow this link https://ninjatrader.com/support/helpGuides/nt8/?order_flow_plus.htm for more details.

Step 1 - download and save the XML file to the following directory. This should be the default directory where you installed NinjaTrader.

\Documents\NinjaTrader 8\templates\Chart

Step 2 - right click on your chart and select Templates > Load and select "@JonnyBoy VWAP Chart Template V2 987 Tick" from the list.

If for some reason it doesn't load and you are a NinjaTrader Lifetime License holder (perhaps you can't transfer templates with an "@" in front of them for some reason), I will gladly post the settings here. Just let me know...

EDIT: One user suggested removing the @ from the file name helped them load the chart template.

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Register to download File Type: xml @JonnyBoy VWAP Chart Template V2 987 Tick.xml (78.0 KB, 106 views)
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  #160 (permalink)
 lynmark1 
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works great, I look to contributing to this forum.

JonnyBoy View Post
I have been getting a ton of PM requests about this so I thought I would try to cover all bases in this post.

The XML file I attached in a previous post was an NT8 Chart Template. It isn't the VWAP indicator! However, if you are a NinjaTrader Lifetime License holder you will be able to replicate my chart exactly by loading this chart template. How does this load the actual indicator? When the chart template is loaded, it will automatically call for the Order Flow VWAP indicator, but again only if you are a NinjaTrader Lifetime License holder.

You can follow this link https://ninjatrader.com/support/helpGuides/nt8/?order_flow_plus.htm for more details.

Step 1 - download and save the XML file to the following directory. This should be the default directory where you installed NinjaTrader.

\Documents\NinjaTrader 8\templates\Chart

Step 2 - right click on your chart and select Templates > Load and select "@JonnyBoy VWAP Chart Template V2 987 Tick" from the list.

If for some reason it doesn't load and you are a NinjaTrader Lifetime License holder (perhaps you can't transfer templates with an "@" in front of them for some reason), I will gladly post the settings here. Just let me know...


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 rstrau 
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Thanks, JonnyBoy. For some reason, when i right click the chart and try to load the template, there is no template there.

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  #162 (permalink)
 JonnyBoy 
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JonnyBoy View Post
I have been getting a ton of PM requests about this so I thought I would try to cover all bases in this post.

The XML file I attached in a previous post was an NT8 Chart Template. It isn't the VWAP indicator! However, if you are a NinjaTrader Lifetime License holder you will be able to replicate my chart exactly by loading this chart template. How does this load the actual indicator? When the chart template is loaded, it will automatically call for the Order Flow VWAP indicator, but again only if you are a NinjaTrader Lifetime License holder.

You can follow this link https://ninjatrader.com/support/helpGuides/nt8/?order_flow_plus.htm for more details.

Step 1 - download and save the XML file to the following directory. This should be the default directory where you installed NinjaTrader.

\Documents\NinjaTrader 8\templates\Chart

Step 2 - right click on your chart and select Templates > Load and select "@JonnyBoy VWAP Chart Template V2 987 Tick" from the list.

If for some reason it doesn't load and you are a NinjaTrader Lifetime License holder (perhaps you can't transfer templates with an "@" in front of them for some reason), I will gladly post the settings here. Just let me know...

For those NT users who can't get the NinjaTrader template I uploaded working, here is a PDF of the settings for the 8 instances of Order Flow VWAP you need to add to your chart.

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VWAP for stock index futures trading?-jonnyboy-ninjatrader-order-flow-vwap-indicator-chart-setup.pdf  
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 rstrau 
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Thanks, JonnyBoy. I saved the file as without the @ and it loaded. Thanks for your help.

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  #164 (permalink)
 Yan Vas 
Anapa, Russia
 
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Hello Jonny Boy, tell us, what determines the choice of chart Tick 987?

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 Big Mike 
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I'm curious about this, can @NinjaTrader confirm that the @ symbol is supported, or is this a bug? Anyone else have the same problem?

rstrau View Post
Thanks, JonnyBoy. I saved the file as without the @ and it loaded. Thanks for your help.

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  #166 (permalink)
 lynmark1 
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I am using NT8 vs 8.0.20.0 64-bit and was able to install the xml file by saving using the @ in the save as description and the template loaded no problems

Big Mike View Post
I'm curious about this, can @NinjaTrader confirm that the @ symbol is supported, or is this a bug? Anyone else have the same problem?


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  #167 (permalink)
 Maizietrader 
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@JonnyBoy, I am always around reading and learning here –thank you @Big Mike. VWAP is big part of my trading and I was trying to articulate it more (e.g dividing the day and targets into VWAP units) and you have just took it to a different level and opened my eye to a truly amazing way of looking at all that. Thank you for sharing your hard earned knowledge.

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  #168 (permalink)
 JonnyBoy 
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Yan Vas View Post
Hello Jonny Boy, tell us, what determines the choice of chart Tick 987?

I actually have a custom data series but it is not a tick chart. However, the internals of my data series do use tick data to build it.

I saved the template from a box standard 987 tick chart so I could be sure that users who didn't have my custom data series could import it. I.E. NinjaTrader didn't go searching for a data series they didn't have. I got of lot of people saying they were having issues importing the first one I uploaded.

Why 987? No reason. I don't believe in Fibonacci (self fulfilling prophecy) but with my custom data series and lots of experimentation, my data series being built from 987 tick data worked best for me, but that doesn't mean it will work best for you. Experiment and find out what fits your trading style / personality.

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 Yan Vas 
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Thank you Jonny Boy! Either I don't see the differrence, or we have different VWAP.


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Big Mike View Post
I'm curious about this, can @NinjaTrader confirm that the @ symbol is supported, or is this a bug? Anyone else have the same problem?


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It should be supported, just double checked and it works as expected.

Disclosure: This communication is sent to you by NinjaTrader, LLC, a software development company which owns and supports all proprietary technology relating to and including the NinjaTrader trading platform.
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 JonnyBoy 
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Yan Vas View Post
Thank you Jonny Boy! Either I don't see the differrence, or we have different VWAP.


Sorry, I am not seeing your point here? Can you expand please?

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 Yan Vas 
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JonnyBoy View Post
Sorry, I am not seeing your point here? Can you expand please?

I did not understand correctly. I thought that you have a building
VWAP and SD depends on the selected Tick value, namely 987. But after reading your message in more detail, I realized that this is not so.

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 yoyotrader1 
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Can you elaborate what you mean by the next level? I am kind of on the same path .

I don't have ninja trader. Any resources for the relative beginner how to maximize use of VWAP (I know what it is, not THAT beginner).


Maizietrader View Post
@JonnyBoy, I am always around reading and learning here –thank you @Big Mike. VWAP is big part of my trading and I was trying to articulate it more (e.g dividing the day and targets into VWAP units) and you have just took it to a different level and opened my eye to a truly amazing way of looking at all that. Thank you for sharing your hard earned knowledge.


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 JonnyBoy 
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yoyotrader1 View Post
Can you elaborate what you mean by the next level? I am kind of on the same path .

I don't have ninja trader. Any resources for the relative beginner how to maximize use of VWAP (I know what it is, not THAT beginner).

There is plenty of information within this thread. NinjaTrader isn't a pre-requisite to be able to learn VWAP setups. You just need to put in the inordinate amount time it takes to recognise them live, know when NOT to take them and learn when to leave profits to run. This thread is a BIG step in that direction already.

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 drinkurmilkshake 
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(pasted screenshot)


I took the liberty of modifying the relevant template VWAPs from RTH to ETH. My screenshot juxtaposes an NQ RTH VWAP chart on top and an ETH VWAP chart of NQ on the bottom.

I'm going to play around with trading these two to look for additional entries and potential confirmation. The screenshot covers roughly 6:45 AM EST to 12:45 EST, and you can see there are TONS of valid VWAP-related entries on the ETH chart (many with little draw down.

The problem with trading the VWAP based off RTH is the limited time frame. It takes hours for the bands to develop to the point where there is a significant gulf between different SD values. I think in the context of a series, this makes the ETH bands more statistically actionable since they started building @ 1700 EST (5:00 PM EST) the previous day. By 6:45 AM EST, I have almost 9 hours worth of data. That's more than the entire RTH trading period.

I'm going to dig into this more, but my hypothesis is that the VWAP setups on the ETH chart have a higher success rate than RTH, along with more opportunities. I'm using the same parameters, entries, SLs and TPs as the RTH setups. If both charts VWAPs are valid, there's no reason in my mind not to trade them both to potentially hit daily goal or nut faster.

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 eminiestrader 
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JonnyBoy, thank you much for the meticulous and informative post! I incorporated your template with the strat that I currently trade and it works wonders! I also use it on MES during the overnight session (ETH) to swing trade the MES. Here is the chart I use for ES during the RTH.
Thank you again!



(pasted screenshot)

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 Maizietrader 
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yoyotrader1 View Post
Can you elaborate what you mean by the next level? I am kind of on the same path .



I don't have ninja trader. Any resources for the relative beginner how to maximize use of VWAP (I know what it is, not THAT beginner).



I use Sierra Charts which I love. Tried many platforms and this one stands out for me.

What I mean by next level is how @JonnyBoy explained in details action around the bands. I came across a VWAP band by chance. I wanted to make the VWAP big so I added 0.2 band around it to just see it and to remind myself how the day is moving. I then noticed that this band has some interesting dynamics. I never thought that these bands should also be considered around 1VWAP and 2VAWP which I use. I also use VWAP unites as initial target/stop and adjust from there (a VWAP unit is the value of 1STD)

What @JonnyBoy explained here is such a gift. As he said you need to put in the hours , it takes long time to recognize the move when it is happening (not after it happened)


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 yoyotrader1 
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Maizietrader View Post
I use Sierra Charts which I love. Tried many platforms and this one stands out for me.

What I mean by next level is how @JonnyBoy explained in details action around the bands. I came across a VWAP band by chance. I wanted to make the VWAP big so I added 0.2 band around it to just see it and to remind myself how the day is moving. I then noticed that this band has some interesting dynamics. I never thought that these bands should also be considered around 1VWAP and 2VAWP which I use. I also use VWAP unites as initial target/stop and adjust from there (a VWAP unit is the value of 1STD)

What @JonnyBoy explained here is such a gift. As he said you need to put in the hours , it takes long time to recognize the move when it is happening (not after it happened)


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I am absolutely in it full time, and am putting a LOT of hours in it. The reason I was asking - is that I did not want to put in those hours in the wrong direction.
I am a big fan of 10,000 hours book and approach, but if you beat it against the wrong wall - no good for anyway.
You are correct, seemingly simple, but @JonnyBoy advice is indeed priceless. P.S. Already bought the Ninja trader too as seems like many people use and refer to examples from it here...

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  #179 (permalink)
 Oriole 
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Kris and Harry (Fat Tails) have Lizard which has a great standard VWAP and a kick-ass premium VWAP. You have to pay a nominal fee for all their library indicators but they keep them updated and they offer so much value. These gentlemen are amongst the most stand up folks that I've come across in my trading career.

https://www.lizardindicators.com/indicator-library-2/session-tools/

https://www.lizardindicators.com/

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 Maizietrader 
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yoyotrader1 View Post
I am absolutely in it full time, and am putting a LOT of hours in it. The reason I was asking - is that I did not want to put in those hours in the wrong direction.

I am a big fan of 10,000 hours book and approach, but if you beat it against the wrong wall - no good for anyway.

You are correct, seemingly simple, but @JonnyBoy advice is indeed priceless. P.S. Already bought the Ninja trader too as seems like many people use and refer to examples from it here...



I really wish that it was easy. The right direction is never clear. Depends on personality, type of trading , — etc). I have been down too many wrong paths and I still stumble a lot to find the “right way”. BigMike advised (not sure when) that it might be a good idea to really focus on one market. Even if you change directions, you will develop a sense for that market. Good Luck


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 paigow 
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Maizietrader View Post
I use Sierra Charts which I love. Tried many platforms and this one stands out for me.

What I mean by next level is how @JonnyBoy explained in details action around the bands. I came across a VWAP band by chance. I wanted to make the VWAP big so I added 0.2 band around it to just see it and to remind myself how the day is moving. I then noticed that this band has some interesting dynamics. I never thought that these bands should also be considered around 1VWAP and 2VAWP which I use. I also use VWAP unites as initial target/stop and adjust from there (a VWAP unit is the value of 1STD)

What @JonnyBoy explained here is such a gift. As he said you need to put in the hours , it takes long time to recognize the move when it is happening (not after it happened)


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hi Maizietrader I also use sierra and so far, I have been unable to create these charts. The vwap that I have used does not have the same number of sd and I am not sure what you mean by 1vwap and 2 vwap. Please explain here or send me an email at dquick16@cogeco.ca. That way, I wont miss your response.

Thanks Don

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Cdtrader82
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Thank you so much for this post! It was very helpful. Can I ask what software you use to record your screen? I have been meaning to add this to my daily routine for journaling and review purposes. Thank you!



JonnyBoy View Post
Although all of the VWAP setups are valid, they will not all work mechanically day in and day out. I have said this previously that you need to spend lots of time studying and gathering metrics as to best types of days (and what the preceding price action looks like) to execute each VWAP setup. Doing this increases their probability of working by some margin.

The VWAP test long and test short are the simplest and easiest VWAP setups to recognise. From memory I recall studying these for about 6 months non-stop. The best way I found to do this is was to record my screen, take chart snapshots and fill a PowerPoint with marked up charts of my observations. Note that reversion to VWAP is a trickier setup to determine and I wouldn't start there.

I see you also have Jigsaw. Putting my views on "Order Flow" trading aside, you could start looking at what price does when it approaches VWAP for a test and see if you can spot something in the underlying structure of the market that could determine a VWAP test failure, else you have a good setup to take.

And just to note, if you want to tag a user so they get notified, you need to put an @ in front of their name.


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  #183 (permalink)
 JonnyBoy 
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Cdtrader82 View Post
Thank you so much for this post! It was very helpful. Can I ask what software you use to record your screen? I have been meaning to add this to my daily routine for journaling and review purposes. Thank you!

I use Camtasia, but that is just me. There are traders who have success with free screen capture software. You can probably search FIO...screen capture software has most certainly been discussed before.

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 LastDino 
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Cdtrader82 View Post
Thank you so much for this post! It was very helpful. Can I ask what software you use to record your screen? I have been meaning to add this to my daily routine for journaling and review purposes. Thank you!

Camtasia and Icecream screen recorder are most widely used. Both have very friendly UI.

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 drinkurmilkshake 
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JonnyBoy View Post
VWAP Trading | April 20, 2020 | ES | Update on Targets

It was a challenge to pick out the VWAP trades today, but there were certainly some good setups.

One thing I need to note is that the T1, T2 and T3 profit targets should be moved to their respective price (around the standard deviation band) on the bar you made the entry on. To put another way, line up your profit targets at the standard deviation envelope lines / price at the time of entry, or you will be forever chasing them as they expand.

I have marked up the chart with triangles to show you what I mean.



The only concerning part of these setups is the high risk. The SD Continuation Long trade risked 35 ticks and got stopped out. PA quickly moved back into the +SD1 band (+SD 0.75 to +1.25). Have you run these setups through enough sims to substantiate placing the stop all the way down to +SD 0.5? The value in ticks in relative, but PA traveled from your entry @ approximately +SD 1.35 down to +SD 0.5.

The majority of these trades are inherently risky. I know that you recommend more risk adverse traders tighten their stops, however i'd be interested to see what you sim history has been.

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  #186 (permalink)
 JonnyBoy 
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drinkurmilkshake View Post
The only concerning part of these setups is the high risk. The SD Continuation Long trade risked 35 ticks and got stopped out. PA quickly moved back into the +SD1 band (+SD 0.75 to +1.25). Have you run these setups through enough sims to substantiate placing the stop all the way down to +SD 0.5? The value in ticks in relative, but PA traveled from your entry @ approximately +SD 1.35 down to +SD 0.5.

The majority of these trades are inherently risky. I know that you recommend more risk adverse traders tighten their stops, however i'd be interested to see what you sim history has been.

You are looking at one marked up chart I did in isolation to the entire context of this thread. Have you read the thread in its entirety? For this particular chart, I updated what the target locations should be because they were not entirely clear in my previous posts.

I have given multiple ways of using data collection to potentially increase your probabilities of one of these setups performing which inherently reduces your risk, and is light years away from being inherently risky. This form of metric harvesting is something I won't give away because this is my edge and for others to learn themselves.

I am not sure what you mean about SIM history? I haven't traded SIM in years, but yes I do have the history on thousands of VWAP trades. In one thread I believe I even gave my VWAP trading statistics. I can't remember which one now.

At the end of the day, this information is free. It isn't plug and play and I have made that abundantly clear (or at least I thought I had). Each trader has to assess their own risk tolerance and do their homework. If done correctly, you can determine as to when executing any VWAP setup has a high probability vs. low risk.

I hope that makes sense.

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  #187 (permalink)
 sg72 
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@JonnyBoy I wanted to express my gratitude for this very well written, thorough and educational post. Thank you for sharing your holy grail.

Understanding context is absolutely key to getting this (or any) method to work properly. For my first time test-driving this, I took several trades in SIM on Friday with the setups presented here and did very well with them. Looking back at trades that didn't work out, it was clear why they didn't (shorting against a strong uptrend). I know that's an over simplification, but it's amazing how much of a difference a simple common sense filter can make.

Again, thank you for sharing the result of your countless hours of research. Much obliged.

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Lfx987
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drinkurmilkshake View Post
The only concerning part of these setups is the high risk. The SD Continuation Long trade risked 35 ticks and got stopped out. PA quickly moved back into the +SD1 band (+SD 0.75 to +1.25). Have you run these setups through enough sims to substantiate placing the stop all the way down to +SD 0.5? The value in ticks in relative, but PA traveled from your entry @ approximately +SD 1.35 down to +SD 0.5.

The majority of these trades are inherently risky. I know that you recommend more risk adverse traders tighten their stops, however i'd be interested to see what you sim history has been.



I recall a write-up about Vwap and SD by Jperl many many years ago (Google "Jperl's Trading With Market Statistics").

I believe there is a thread here about it:




Anyway, the point is that Jperl suggested using a scaling in approach with his VPOC/VWAP/SD based strategy ie. if you believe a continuation set-up is likely taking place, you'd place ie. 1 lot at your initial entry. Then if trade happened to go against you and approached the next SD level, provided your underlying trade analysis was still intact and price action was confirming, you'd scale in using another lot. You'd keep doing this until your analysis had changed or your maximum $ Stop Loss level was reached.

Using scaling in with VWAP/SD, allows you to have statistical based entry locations rather than haphazard areas which really does help quantify risk from the offset (obviously levels are fluctuating but not wildly so after the first 30/60 minutes)

There are many ways to trade a VWAP/SD strategy. I always preferred the scaling in method as I was never that great at entries (always too eager to get in to a position) . Scaling in always allowed a little more leeway for me.

The thing is to take what is being taught and to make it your own given your risk tolerance and your own personality and trading strengths and weaknesses.

JB has been kind enough to show a few set-ups. In my humble opinion, to anyone who has decided to follow this, is to start with just one set-up and master that. Learn to identify the one set-up and then keep practicing execution on it until it becomes second nature. Once you have it down and can execute in a live environment consistently, then look to add the other set-ups.

More often than not, a couple of set-ups is all you need.

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  #189 (permalink)
 josh 
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Cdtrader82 View Post
Thank you so much for this post! It was very helpful. Can I ask what software you use to record your screen? I have been meaning to add this to my daily routine for journaling and review purposes. Thank you!


OBS Studio - free, wonderful, and easy to use once you invest 15-30 minutes to learn it. If you have a good GPU and set it to use hardware for encoding, you will not notice it's running. If you use software encoding, you will likely have to record at a lower framerate or resolution in order to ensure it doesn't affect your machine's performance while trading.

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  #190 (permalink)
 drinkurmilkshake 
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Lfx987 View Post
I recall a write-up about Vwap and SD by Jperl many many years ago (Google "Jperl's Trading With Market Statistics").

I believe there is a thread here about it:




Anyway, the point is that Jperl suggested using a scaling in approach with his VPOC/VWAP/SD based strategy ie. if you believe a continuation set-up is likely taking place, you'd place ie. 1 lot at your initial entry. Then if trade happened to go against you and approached the next SD level, provided your underlying trade analysis was still intact and price action was confirming, you'd scale in using another lot. You'd keep doing this until your analysis had changed or your maximum $ Stop Loss level was reached.

Using scaling in with VWAP/SD, allows you to have statistical based entry locations rather than haphazard areas which really does help quantify risk from the offset (obviously levels are fluctuating but not wildly so after the first 30/60 minutes)

There are many ways to trade a VWAP/SD strategy. I always preferred the scaling in method as I was never that great at entries (always too eager to get in to a position) . Scaling in always allowed a little more leeway for me.

The thing is to take what is being taught and to make it your own given your risk tolerance and your own personality and trading strengths and weaknesses.

JB has been kind enough to show a few set-ups. In my humble opinion, to anyone who has decided to follow this, is to start with just one set-up and master that. Learn to identify the one set-up and then keep practicing execution on it until it becomes second nature. Once you have it down and can execute in a live environment consistently, then look to add the other set-ups.

More often than not, a couple of set-ups is all you need.


I can't begin to thank @JonnyBoy enough for his setups and explanation of VWAP. I had always only considered the actual VWAP itself, and never thought much of the SD levels (which are everything).

I reviewed the entries/scale-in strat suggested by Jperl, and it appears he only scales into a losing trade. There doesn't seem to be a method to scaling into the trade however, and looks completely discretionary. I don't like the idea of scaling into what may likely be a losing trade. I understand there will be some draw down (very few entries are perfect to the tick), however I don't like the odds. I'd much rather scale into what will likely be a winning trade, and add lots in the direction of the profitable PA.

I attached a chart from 5/7 (EST) of ES 06-20 to show a possible scale in strat. The buy zone continues to exist between +SD 0.25 and +SD 0.5, however I scale in @ interior SD levels in the direct of the signal PA. The stop is already a bit far for my risk appetite, but I'd much rather hit it with 1 lot than 5 lots.

This would be interesting to use to script orders. We'd need (2) additional VWAP indicators (or however many divisible by the amount of entries) to print the SD levels (e.g. +SD 0.27, 0.32....). The trade would remain discretionary and the script would just place buy limits.

ES 5-7 VWAP

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  #191 (permalink)
 TraderDoc007 
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drinkurmilkshake View Post
The only concerning part of these setups is the high risk. The SD Continuation Long trade risked 35 ticks and got stopped out. PA quickly moved back into the +SD1 band (+SD 0.75 to +1.25). Have you run these setups through enough sims to substantiate placing the stop all the way down to +SD 0.5? The value in ticks in relative, but PA traveled from your entry @ approximately +SD 1.35 down to +SD 0.5.

The majority of these trades are inherently risky. I know that you recommend more risk adverse traders tighten their stops, however i'd be interested to see what you sim history has been.

From reading responses to posts, you can usually get some idea of whether there is some psychological work that a trader should concentrate on. Keeping the mind well tuned is vital for becoming a profitable trader. This is no criticism Milkshake so please do not read it as such, I’m merely making an observation.

The trade that lost $1700 on the marked up chart that JohnnyBoy illustrated seemed to strike fear into you Milkshake resulting in you requesting proof of the profitability of the methodology. This is a classical flight or fight response when something that you’ve interacted with does not match your own internal idea or thought process.
My interpretation of the chart is slightly different. From reading the posts of JohnnyBoy in this thread, he has given the community an unbelievable idea and technique to trade the markets. It is very sound and it definitely has a very demonstrable edge. The loss of $1700 on multiple contracts is really just one of the trades of many probably very profitable trades that his technique would generate. JohnnyBoy obviously knows his methodology very well and this losing trade was one of the costs of doing business in the markets. It is actually even more commendable that JB showed this actual chart and didn’t try and cherry pick a day or chart where all trades were profitable.
Trading is a game of numbers where your edge needs to work over time, not everyday. There are going to be losing days in trading but you have to just stick to your rules and plan everyday, like JB illustrated here, and you will end up being profitable and successful.

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 oheyn 
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TraderDoc007 View Post
From reading responses to posts, you can usually get some idea of whether there is some psychological work that a trader should concentrate on. Keeping the mind well tuned is vital for becoming a profitable trader. This is no criticism Milkshake so please do not read it as such, I’m merely making an observation.

The trade that lost $1700 on the marked up chart that JohnnyBoy illustrated seemed to strike fear into you Milkshake resulting in you requesting proof of the profitability of the methodology. This is a classical flight or fight response when something that you’ve interacted with does not match your own internal idea or thought process.
My interpretation of the chart is slightly different. From reading the posts of JohnnyBoy in this thread, he has given the community an unbelievable idea and technique to trade the markets. It is very sound and it definitely has a very demonstrable edge. The loss of $1700 on multiple contracts is really just one of the trades of many probably very profitable trades that his technique would generate. JohnnyBoy obviously knows his methodology very well and this losing trade was one of the costs of doing business in the markets. It is actually even more commendable that JB showed this actual chart and didn’t try and cherry pick a day or chart where all trades were profitable.
Trading is a game of numbers where your edge needs to work over time, not everyday. There are going to be losing days in trading but you have to just stick to your rules and plan everyday, like JB illustrated here, and you will end up being profitable and successful.

Hi!

Well said.
There are several calculators to get an idea of how many winners and loosers in a row a strategy can have.

EquityCurveSimulator

To prepare mentally is very imprtant.

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  #193 (permalink)
Cdtrader82
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josh View Post
OBS Studio - free, wonderful, and easy to use once you invest 15-30 minutes to learn it. If you have a good GPU and set it to use hardware for encoding, you will not notice it's running. If you use software encoding, you will likely have to record at a lower framerate or resolution in order to ensure it doesn't affect your machine's performance while trading.


I've heard of this one! I was a bit overwhelmed with learning it, but will take the time to check it out Thank you!

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  #194 (permalink)
 Maizietrader 
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paigow View Post
hi Maizietrader I also use sierra and so far, I have been unable to create these charts. The vwap that I have used does not have the same number of sd and I am not sure what you mean by 1vwap and 2 vwap. Please explain here or send me an email at dquick16@cogeco.ca. That way, I wont miss your response.

Thanks Don

1- Studies: chose Volume Weighted Averge Price

2- Setting and input: Make Band1 STD 0.25 and Band 2 Std -0.25

3- subgraphs: Top Band1 : Transparent Fill Bottom and Top Band2: Transparent Fill Top

You can repeat this for every band as this will give you the middle one (make another 4 for +1VWAP, -1VWAP, +2VWAP and -2VWAP)

Good Luck

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 paigow 
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HI Maizietrader

Thanks for responding.

I am just learning about vwaps and rolling vwaps anchoring and non anchoring

Still not sure if I have the correct setup

Using vwaps makes sense to me

You have been most gracious in replying


Thanks

Be safe

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  #196 (permalink)
 drinkurmilkshake 
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TraderDoc007 View Post
From reading responses to posts, you can usually get some idea of whether there is some psychological work that a trader should concentrate on. Keeping the mind well tuned is vital for becoming a profitable trader. This is no criticism Milkshake so please do not read it as such, I’m merely making an observation.

The trade that lost $1700 on the marked up chart that JohnnyBoy illustrated seemed to strike fear into you Milkshake resulting in you requesting proof of the profitability of the methodology. This is a classical flight or fight response when something that you’ve interacted with does not match your own internal idea or thought process.
My interpretation of the chart is slightly different. From reading the posts of JohnnyBoy in this thread, he has given the community an unbelievable idea and technique to trade the markets. It is very sound and it definitely has a very demonstrable edge. The loss of $1700 on multiple contracts is really just one of the trades of many probably very profitable trades that his technique would generate. JohnnyBoy obviously knows his methodology very well and this losing trade was one of the costs of doing business in the markets. It is actually even more commendable that JB showed this actual chart and didn’t try and cherry pick a day or chart where all trades were profitable.
Trading is a game of numbers where your edge needs to work over time, not everyday. There are going to be losing days in trading but you have to just stick to your rules and plan everyday, like JB illustrated here, and you will end up being profitable and successful.


@TraderDoc007 I completely understand that every trade is not going to be a winner, and losses happen. I've greatly enhanced my trading integrating @JohnnyBoy VWAP setups with my existing order flow indicators. My interest is in where his setups' stops are located. I believe he said he has the data/probabilities for stop hits and draw downs trading these setups. My question is whether in his trading, if providing the "breathing room" of up to 1.12 SDs maintains a positive expectancy. In a previous post his records show about a 69% success rate. I wouldn't be surprised if he has an average R-multiple of 2-3R/trade. I'm assuming it does, and I'm only looking to optimize where I place stops. I like to cut a trade when draw down turns into what I perceive as a losing trade.

Many of the VWAP setups that I've started to look at have some draw down as with most trades. This is all anecdotal (I haven't started to journal SIM trades yet), but most of the profitable moves don't maintain more than about ~0.25 SD. If a wider stop is prudent though, and shown to be more profitable in the long run, I'm more than willing to adjust my SLs. I'm used to placing stops around Wyckoff waves, which aren't married to VWAP calculations.

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  #197 (permalink)
Plankton