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The standard order flow volume profile (either the indicate or the drawing tool) in Ninjatrader only displays the POC at a point in time. It does not show previous POC prints in whatever session you define. Your screenshot from the Gomi tool has POC represented by a red line. In the Gomi version, a horizontal orientation represents the POC for however long it was valid. The upward/downward shifts represented by the vertical jump to the next horizontal orientation represent the next subsequent POC value and so forth.
The reason that it's important is as price moves from low volume to high volume and vice versa, the user is only aware of where the current POC value is and none of the historical values (this is the ninjatrader version). You're left with the volume graph/heat map to determine previous potential points of control. I think its also helpful to predict when the value of the POC may shift. Jperl recommends exiting a valid setup when the POC shifts against whatever skew you traded.
Can you help answer these questions from other members on NexusFi?
I'd be interested to hear from @JohnnyBoy on what he thinks about integrating POC into his various setups. Looking through several weeks worth of NQ, I''ve found many instances where POC/VWAP skew doesn't line up with how price behaves around VWAP and SD levels. I can begin to see what @Silvester17 meant with POC/VWAP not presenting an edge.
I think the biggest signal/tell with POC/VWAP is when POC makes a sudden shift from below to above VWAP (or vice versa). So far, I've seen this behavior signal an imminent change in behavior. POC rarely prints beyond SD1. Trying to determine the significance of that.
It's been years since I looked into VWAP and VPOC, but looking at @Silvester17's chart reminded me of what I remembered.
They generally are pretty much in step, if you allow for the fact that VPOC will stay the same for a relatively long period of time and then suddenly shift, taking big steps where VWAP has been taking small ones. Also, VPOC sometimes will go off on its own for a while, leaving VWAP for a time before they come back closer together. This discontinuous movement is obviously due to the fact that VPOC is the level that has the highest volume in the distribution, which may suddenly change by a large amount as it shifts to another bar in the distribution, which may be far away in price from the previous longest bar -- even though the volume distribution as a whole had been moving in one direction for some time. VWAP changes continuously and so doesn't have those sudden jumps; it is adjusting to changing volume and price changes all the time.
They clearly have a relationship, which is that they both show where volume has concentrated, but their calculation is different, and you could say that VPOC is a blunter tool, if you are simply interested in an average level (no offense is meant toward the use of volume profile nor the VPOC, which are not in fact exactly about the average, and more about the distribution and what traders can deduce or surmise from it.)
Because of the differences in how they are derived, and in a way of what they mean, it's tempting to expect there to be a meaningful relationship, but I don't know what it would be.
As for the VPOC seldom printing beyond 1SD, I would say that this is pretty much because VPOC is, in its way, something that marks the center of where volume has been, which in another way is also what VWAP is doing. So it would be unusual to see the VPOC being as much as 1SD from the VWAP. I think the main lesson is that VPOC will change more slowly, in its sudden way (less change and then big steps), and will sometimes lag VWAP if there is a trend going on. But I would be surprised to see anything tradable from this.
I do not specialize in either, using VWAP and its SD's just as markers for levels, and not using profile at all, so it is probable I don't really know what I'm talking about.
If there is a tradable relationship I would be delighted to know it, but also surprised.
Bob.
When one door closes, another opens.
-- Cervantes, Don Quixote
Thank you for this detailed clarification. I totally agree with you.
I tend to use the Volume Profile (similar to the one displayed on that chart) more than VWAP for scalping. But if I see some price action around the VWAP then I try to take advantage of that as well. I am not expecting any confluence, but if it happens then more power.
Mmm. It appears that you want me to justify their significance or rationale in a binary answer? If that is the case, then I can't. Because what I may deem to be significant and what fits into my trading rationale might be different to yours and likely different to many others.
Some traders might think VWAP falls into the category of a self fulfilling prophecy and I don't have a problem with that. I don't have a problem with it because I have spent years looking and analysing VWAP data to conclude that it to me it is the most valuable thing I have ever found in trading. I believe it holds value and significance but with a caveat around the word ''significant'' and to some extent the word ''value''.
One of the reasons I started to delve into VWAP all those years ago was because of an ex-institutional friend of mine who only traded VWAP in all of its different methods of deployment. He has never traded anything else. Not order flow, not any other indicators, nothing except VWAP and volume. Volume of course being a input/derivative of VWAP.
All he wants to see is what every other trader in the world can see independent of everything else. He was benchmarked against it and he got paid if he significantly ''bettered'' it.
Now, you can't just throw a VWAP on your chart and expect setups to just happen because they won't. Setups do exist but I have always stated that as a trader you have to diagnose if a setup is valid. And that is something I have touched on how to do, kinda, but I can't and won't divulge everything of course.
But, I will say this. The ultimate goal is to estimate the volume profile of the instrument(s) of your choice without any prior knowledge of that day's volume. If you can do this, you can also estimate VWAP - meaning you have a higher percentage chance of executing better than VWAP for the setups that you do take.
A very simple example would be if you estimated a very strong up trend day to with a P shaped profile (let's say) and a gap up open. By a derivative of that profile, VWAP can be estimated, so you can consider buying below VWAP if the opportunity arises as a good opportunity, or buying at VWAP touches early on in the session is another. This example is really diluted down and it is more complicated than that but I hope it frames something.
Of course, not all anchored VWAP swings have any significance either. Even strong ones get blown, but what significance you as a trader put on them is up to you. It takes a lot of work to figure it out so it is not the simple answer that people want to hear, because nothing is easy in trading apart from losing money. We can all do that.
At the end of the day, VWAP and all content in this thread relating to it is about opinion. My research and models took a long time to put together but that doesn't mean they hold any more value to somebody else's moving average.
I guess the point here is, if you don't see value in it or can't make it work for you then something else is out there, like the strat for example.
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- Trade what you see. Invest in what you believe -
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Thanks for your reply @JonnyBoy
I was just wondering if you were aware of any institutional parties using anchored VWAPS in any way , shape or form - as we are aware that session VWAPS indeed are.
That is all - so you have answered my question, many thanks.
I will have a look at their utility (to me) as I get deeper into my own research into some of the ideas you have presented in this thread.
Certainly appreciative of what you have done in this thread.
Hi
have been using Rancho Denero Deluxe suit and have the session profile on a 5 min chart, and the Composite on a 15 min chart and find them excellent I use the weekly and monthly VWAPS on the 15 min chart . I also have the profile drawing tool , if you find the market in a balance for a couple of days it is quite good I use it mainly on the longer time frame charts 60 and 120 min charts on balance areas
I think this is a very important aspect of any trading style and that is to have the ability to, at least a decent percentage of the time, be able to forecast the type of day.
If not from the opening then as early in the session as possible. If you can forecast the day then you can forecast the VP and VWAP. If you have some confidence with that then other things get a lot easier.
@Pa Dax often makes a call on the type of day based on early session price action. It can also be done by looking at historical probablilities ie what VP is likely after a large down day or after 3 days of ranging.
On the latter approach - have people been able to extract good metrics and if so is there a good source or good software to do this? Can NT8 be used for this?
