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I posted and then deleted. I wasn't happy with my explanation - you can probably see my text response in the email you'll probably get from FIO. But let me tackle this tomorrow when I am less tired.
Thanks.
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- Trade what you see. Invest in what you believe -
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My charts showed Friday was a banner day for the setups mentioned earlier in this thread. Two early VWAP test shorts had to be discarded because they broke a tick or two too high, BUT. There were 4 textbook "-1 SD continuation" trades" in a row. I also had the ETH VWAP up, and those two VWAP test shorts respected the rules regarding the 0.5 line.
Interesting how price seemed to respect the VWAP all morning, then shift gears *right* at 1:00 PM and drive up into the close.
Indeed. Like you said banner days, when they work, they work very well. I remind people all of the time that DM me, to remain with your feet planted on the ground. These kinds of days are a great for VWAP traders and you can feel untouchable, but on A.N. Other day it will rip your face off. It's all about contextualizing the day, prior days, opening type and all that jazz. Nothing wrong with stepping lightly into the first trade.
I was busy forward testing my algorithm so it (and me) missed those setups although I saw them play out and I was like damn, of all the days to not be in...
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- Trade what you see. Invest in what you believe -
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Yes, I have discussed anchored VWAPs in the past to some extent, but perhaps some examples would help flesh things out. I call these Anchored Action VWAPs or just Action VWAPs, but you can really call them what you want. The main point is to consider these as potential actionable VWAP locations. These are not absolute must trade areas, but locations where you might want to take action if corresponding price action and internals are in your favour to do so.
So, let's have a look at the categories of Anchored Action VWAPs:
Swing VWAPS
Swing VWAPs have the most degree of interpretation. Just like an out of the box Swing indicator or Fractal indicator, you need a certain number of bars preceding a high/low and succeeding a high/low to bake in the swing. This will depend on your data series.
Simplistically, I use a minimum of 9 bars preceding and 2 bars succeeding to define the swing. Generally, if price breaks/traverses across a swing VWAP and has 2 closes on the other side of it, the Swing VWAP colour will update to Long Swing VWAP or Short Swing VWAP depending on the direction of traverse.
In addition I 'cut off' Swing VWAPs when they become irrelevant. The calculation used to determine irrelevant is unique. This means that I won't get caught up with tens of developing Swing VWAPs finding their way to the right hand side of the chart and cluttering it up, plus, I know that by calculation it is telling me not to pay attention to these in the future (they have passed their sell by date so to speak) so just don't develop them any further.
GAP VWAPS
The beauty of GAP VWAPs is that they are the same for everybody. No interpretation required. The 2 charts below show a GAP VWAP from 25th October RTH session into 26th October RTH session, both on a 2000 tick chart.
You literally anchor a VWAP from the last bar of the RTH session (technically correct) or the last swing high/low set between 14:00 and 14:15 MST - the electronic close. You can experiment, but the idea is to let this GAP VWAP roll into the next RTH session. If there is a GAP open during the next RTH session you now have a point of reference.
You can see this was a masterful Gap Swing rolling VWAP that contained price to the upside yesterday - to the tick - and when price broke the lower VWAP Swing, it came back up to kiss the RTH VWAP (to check for any unfinished business) and then sold the heck off.
During this time I am looking at the market internals. TICK, ADV and to some extent the CD. You mentioned this in your DM to me. Yes, I do use the CD as a point of reference but often the ADV and CD are doing similar things, so be careful not to fall foul to information overload. These showed signs of weakness, when perhaps price didn't...until it did.
ES 12-20 (2000 Tick) Gap + Swing VWAP
ES 12-20 (2000 Tick) Gap + Swing VWAP Close Up
Highest/Lowest VWAPS
A form of Swing VWAP but this time you are only interested in the current HOD and LOD anchoring a VWAP respectively. In addition, you can select a period of time to anchor this High or Low to. What do I mean by that? Well, let's say the market had an outside day on Monday but had inside days on Tuesday and Wednesday. You could anchor a VWAP to the HOD and LOD from Monday's session and see if price (when it gets to these levels) is interested in doing anything.
ES 12-20 (2000 Tick) Low + High Swing VWAP
Monthly Options Expiration VWAP
Monthly OPEX VWAPs are the same for everybody. No interpretation required. These often lose potency as time progresses and the next monthly OPEX day is arriving but still worth noting its location.
ES 12-20 (2000 Tick) Options Expiration VWAP
Contract Rollover VWAP
Again, very obvious (no chart included). Again, these tend to lose potency as time moves forward but still worth nothing their location.
News / Significant event VWAPs
Manually located. High impact news events that are worth tagging, especially on bullish/bearish spikes.
Monthly / Weekly / Yearly VWAPs
We have discussed these before. Exactly as they say on the tin.
Historical Daily VWAPs
We have discussed these before. Exactly as they say on the tin. I roll 7 days RTH session VWAPs forward.
Although I have referenced futures here, it can also be applied to stocks. I have always said that stocks appear to behave better with respect to VWAP, well certain ones to anyway.
None of this should be considered verbatim setups either. Some days you don't need to contextualize with the market internals - the setups are that obvious - but most days you will be looking for signs of weakness or strength and going from there.
Fibonacci Settings
Fibonacci numbers are a self fulfilling prophecy. I only use them because if people believe they hold some mystical power (something like that) and if enough traders believe they are reactionary, I am on board.
On an evidence based approach, Fibonacci with respect to trading has been debunked. The book by David Aronson is a real eye opener and he debunks (on an evidence based scientific basis) most technical analysis. For another thread.
So, I think I covered mostly everything associated with anchored VWAPs and how they can be utilised.
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- Trade what you see. Invest in what you believe -
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When I first started learning about VWAP strategies I read something that said "trade toward VWAP on range days, and away from VWAP on trend days."
Looking at a day like today, mean reversion trades would have worked well. A lot of setups where you could either fade from the +/-2 SD or just take a continuation from the 2 SD to the 1 SD toward VWAP.
I've tried "expiry day" vwap after reading about it in last post here, while in theory it makes lot of sense I have not seen much of an advantage over regular Monday anchored vwap by itself. However, later I put together both regular Monday anchored and expiry vwap (expiry is weekly, on each Thursday), resultant was interesting.
Now I'm wondering what happens if we can have a vwap anchored on each day of the week at the same time, that would make some interesting ribbon of vwap.
Just throwing up idea here. I've not yet programmed and checked.
Where did you get the information that Options expire weekly every Thursday? It is the third Friday of every month.
Monthly options expirations:
17 January 2020
21 February 2020
20 March 2020
17 April 2020
15 May 2020
19 June 2020
17 July 2020
21 August 2020
18 September 2020
16 October 2020
20 November 2020
18 December 2020
Irregular weekly options expirations in 2020 (normally Friday):
9 April 2020 (Thursday, due to Good Friday on 10 April 2020)
2 July 2020 (Thursday, due to 3 July exchange holiday and 4 July on Saturday)
24 December 2020 (Thursday, due to Christmas Day on Friday 25 December 2020)
31 December 2020 (Thursday, due to New Year’s Day on Friday 1 January 2021)
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- Trade what you see. Invest in what you believe -
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Oh for sure. I never deal with weekly Options expiration. I'll go an clarify in my post if it's still available to edit.
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- Trade what you see. Invest in what you believe -
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