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VWAP for stock index futures trading?


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VWAP for stock index futures trading?

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  #501 (permalink)
 drinkurmilkshake 
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Silvester17 View Post
I really don't remember what was involved in that research. but if your testing is showing some interesting results, I would definitely continue.

not sure what you mean by "prints a consistent line for POC that jumps vertically when it changes". you can use whatever plot style you want, but changes in the poc could involve a big jump in price. and when it comes to accuracy, I would be surprised if you find anything better than the gomi tools.

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.

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  #502 (permalink)
 trendisyourfriend 
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drinkurmilkshake View Post
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....

It does. Here is a picture using the native volume profile tool in Ninja:

For accuracy, you can select various options. It's up to you. Some options are more accurate but it takes longer to process.


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  #503 (permalink)
 drinkurmilkshake 
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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.

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  #504 (permalink)
 bobwest 
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Silvester17 View Post
don't know about rancho dinero, but I know everything in the gomi tools is available.




as far as the relationship between poc and vwap, we did extensive research here on fio. that was a long time ago (~10 years). I don't remember who was all involved, but I do remember nobody found a noticeable edge. maybe it changed in today's market. either way I wish you good luck


drinkurmilkshake View Post
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.

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  #505 (permalink)
 justtrader 
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bobwest View Post
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.
.
.
.
If there is a tradable relationship I would be delighted to know it, but also surprised.

Bob.

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.

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  #506 (permalink)
 JonnyBoy 
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Linds View Post
Question re anchored VWAPs

I am interested in the idea of anchored VWAPS, anchored from swings mainly.
However, though it may look neat and useful on some charts..like this one from @JonnyBoy





I seek to further understand the rationale behind their alleged significance. The session VWAP rationale seems clear - we all see the same line and we know it has actual execution significance for professional traders. Is there any evidence that a swing VWAP has any execution significance..or are we just curve fitting to help us feel good about it?

My thinking is that the VWAP from a key swing area may well be institutionally significant. But this is just a mix of my logic and intuition - I have no evidence for it. But the thinking is this..if a swing area is deemed by MM's/instituions etc to be a revesal zone then from that point a different set of algorithms will be in play. Then from that point the people in the know will be benchmarking of a new VWAP...at least for a time.

thoughts?

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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  #507 (permalink)
 Linds 
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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.

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  #508 (permalink)
 justtrader 
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Linds View Post
Here's a look at how a VWAP test long setup would have worked on the RTY today. I didn't actually mark the trades...they stand out pretty well. The pink lines are at +/- 0.25 VWAP. I have started looking at the ^TICK index to gauge how the market is behaving around VWAP. I use an SMA to filter out the noise and provide a simple visual clue.

Image: https://futures.io/postcache/2/f/5/c/d/7/Screenshot-47.png
(https://postimg.cc/cKwb43xt)

Nice Chart. Add to that the developing Volume POC and you have a strong confluence.

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  #509 (permalink)
 martinhunting 
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drinkurmilkshake View Post
@Roman77 This is solid gold. I've come to the startling realization that traders that don't use/integrate VWAP and volume profile analysis (primarily POC) into their trading decisions are analogous to a society that just produced an automobile vs a society that has mastered space flight.

I searched and found the 'summary' thread by the original author, however the links to all his .swf videos are dead. The text and intact images are great, but videos show the real meat and potatoes of this style. Since the POC and VWAP changes as price and volume change, a video is a better demonstration of this trading methodology vs a static chart. If the content is gone forever and jperl unreachable, I propose that we recreate his content. While JohnnyBoy may have given us the golden ticket to enter the chocolate factory, I feel like jperl is the Willy Wonka that met us at the gates.

EDIT:

I forgot to mention that one of the most interesting concepts regarding moving the volume profile's beginning is very similar to JohnnyBoy's use of anchored VWAPS to 'interesting' levels or swing lows/highs. Jperl talks about anchoring the order flow volume profile to a user-defined point after the market open (ETH/RTH). His reasoning and analysis is to accommodate scalping, however similar to JohnnyBoy's use of anchored VWAPS, I think the applications are broader.

Ninjatrader's native 'order flow volume profile' indicator can move the start to predefined market hours (e.g. futures ETH or futures RTH), but cannot be anchored to a user-defined bar or time stamp. I'm looking at Rancho Dinero's indicator set, and specifically their 'Range Volume Profile Drawing Tool' to fulfill the user-defined volume profile anchoring. Wondering if anyone has experience with their volume profile indicators or maybe the whole suite.



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

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  #510 (permalink)
 Linds 
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JonnyBoy View Post

....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.

.....

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?

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  #511 (permalink)
 joe s 
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martinhunting you should post some pictures to see what it looks like

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 justtrader 
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martinhunting View Post
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

Is there a way for you to show some charts for us to visualize what you described here?

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  #513 (permalink)
 Rrrracer 
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Linds View Post
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?

This is a great topic and worthy of it's own thread. Maybe @Pa Dax and others would be willing to shine a light on the subject?

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 martinhunting 
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justtrader View Post
Is there a way for you to show some charts for us to visualize what you described here?

HI

Here is my 15 min. chart with the Rancho Denero composite volume profile , with the weekly and monthly VWAP. Both acts as support, and sloping up. I put in the drawing tool as you can get an idea how it works, Price balanced across the VPOC with support from the weekly VWAP and the LVN. at 6601. Resistance from the LVN AT 6626 Which is marked on the left hand side of the chart.

The drawing breaks down the balance It has the same VPOC , The daily VWAP, The VAH. and the VAL. gives a reasonable area to trade for entries and exits .

You will notice the breakout was launched from the VPOC. bars start to increase, There is a short balance using the LVN now as support. Drops and spikes down to the VAL. of the drawing profile, but the body of the candle does not go below the VPOC
@AUS200 (15 Min Heiken-Ashi) 2020_12_04 (5_07_35 PM)


The 5 min chart shows the Session for Rancho Denero volume profile. The profile shows price for the today, and the profile for yesterday, Price had moved up from yesterday profile and was trading around yesterday highs for the session.

Price traded all day above the IBL.66122, and above the midline (yellow line) comes with the Rancho Denero suit. The red line is the movement of the VPOC during the day. From around midday price traded between the VAH and VAL. and midline. The information for the day session is all there on the chart

@AUS200 (5 Minute) 2020_12_04 (5_38_20 PM)

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  #515 (permalink)
 LastDino 
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Rrrracer View Post
This is a great topic and worthy of it's own thread. Maybe @Pa Dax and others would be willing to shine a light on the subject?


+1

I think we have @GruttePier and @snax who have done some work in it as well. So I do think this would be a great topic for combine-sortof-journal-chartposting topic. Similar to PATs price action thread.

I've made some unsuccessful attempts myself at this using OR and IB, but that's topic for that tread if we get one. @Rrrracer, maybe take the lead?

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 justtrader 
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martinhunting View Post
HI

Here is my 15 min. chart with the Rancho Denero composite volume profile , with the weekly and monthly VWAP. Both acts as support, and sloping up. I put in the drawing tool as you can get an idea how it works, Price balanced across the VPOC with support from the weekly VWAP and the LVN. at 6601. Resistance from the LVN AT 6626 Which is marked on the left hand side of the chart.

The drawing breaks down the balance It has the same VPOC , The daily VWAP, The VAH. and the VAL. gives a reasonable area to trade for entries and exits .

You will notice the breakout was launched from the VPOC. bars start to increase, There is a short balance using the LVN now as support. Drops and spikes down to the VAL. of the drawing profile, but the body of the candle does not go below the VPOC
@AUS200 (15 Min Heiken-Ashi) 2020_12_04 (5_07_35 PM)


The 5 min chart shows the Session for Rancho Denero volume profile. The profile shows price for the today, and the profile for yesterday, Price had moved up from yesterday profile and was trading around yesterday highs for the session.

Price traded all day above the IBL.66122, and above the midline (yellow line) comes with the Rancho Denero suit. The red line is the movement of the VPOC during the day. From around midday price traded between the VAH and VAL. and midline. The information for the day session is all there on the chart

@AUS200 (5 Minute) 2020_12_04 (5_38_20 PM)


Excellent! Thank you for sharing.

On your first chart, what time range does the Volume profile on the right extreme cover? Looks like the volume profile on the left is for the prior day, correct?

The LVN values you referenced come out of the right hand side VP. It that is the current day's VP then I am surprised to see these LVNs behave that nice.

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  #517 (permalink)
 Robx 
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Thanks
Quoting 
@JonnyBoy

for this superb explanation of your Vwap system along this thread !.
I use Vwap from some years ago and i agree with all the explanations you give.

Im now testing your last Template for NT8 combining with my own setup, and as i also use NT Tradedectectors with BigBlocks i would like to ask you if you do too. I consider them very useful for testing the Offer / Demand of the institutions at the decision points of Vwap.

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 justtrader 
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Robx View Post
Thanks for this superb explanation of your Vwap system along this thread !.
I use Vwap from some years ago and i agree with all the explanations you give.

Im now testing your last Template for NT8 combining with my own setup, and as i also use NT Tradedectectors with BigBlocks i would like to ask you if you do too. I consider them very useful for testing the Offer / Demand of the institutions at the decision points of Vwap.

What are and how do you use NT Tradedectectors?

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  #519 (permalink)
 Robx 
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Sure, It's just the OrderFlow Trade Detector indicator included on the NT8 License.
It shows (Big) Trades based on Bid/Ask or Blocks. These trades are usual at the Vwap as the Algos uses it as their benchmark for closing trades at the committed operation price.


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 joe s 
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thanks martinhunting for the pictures

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  #521 (permalink)
 joe s 
sacramento ca us
 
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Robx I will take a look at that looks interesting

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  #522 (permalink)
 justtrader 
San Francisco, CA
 
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Robx View Post
Sure, It's just the OrderFlow Trade Detector indicator included on the NT8 License.
It shows (Big) Trades based on Bid/Ask or Blocks. These trades are usual at the Vwap as the Algos uses it as their benchmark for closing trades at the committed operation price.

Wow. I guess I have not explored all the indicators that come with the package. Great. Thank you.

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  #523 (permalink)
 Mich62 
Netherlands
 
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Linds View Post
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.

.... 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?

IMHO a good source on how to obtain a bias for the day or type of day would be the webinar " Linda Bradford Raschke on Day Type, Taylor Trading, Trade Location, More" (using The Taylor Trading Technique).

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  #524 (permalink)
 martinhunting 
melbourne victoria australia
 
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justtrader View Post
Excellent! Thank you for sharing.

On your first chart, what time range does the Volume profile on the right extreme cover? Looks like the volume profile on the left is for the prior day, correct?

The LVN values you referenced come out of the right hand side VP. It that is the current day's VP then I am surprised to see these LVNs behave that nice.

The chart on the right is a composite profile. The composite has four settings and the one on the chart is set at dynamic which covers the bars seen on the chart The first setting the composite profile has is a longer time frame (Dated composites) which starts on a specific date and runs through to the present time. The other time frames are where only a particular set of bars from a specific point are profiled (Fixed composites), a set of visible bars are profiled (Dynamic composites) or a specific number of sessions are profiled (Rolling composites).
In any mode the composite profile can automatically mark prices of high and low volume on the chart with horizontal lines which extend all the way across the chart.


The profile on the left is the Range Profile drawing tool which can profile any section of the chart over any time frame for which you have data. It was not for the day before but where the market was balancing .

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  #525 (permalink)
 justtrader 
San Francisco, CA
 
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martinhunting View Post
The chart on the right is a composite profile. The composite has four settings and the one on the chart is set at dynamic which covers the bars seen on the chart The first setting the composite profile has is a longer time frame (Dated composites) which starts on a specific date and runs through to the present time. The other time frames are where only a particular set of bars from a specific point are profiled (Fixed composites), a set of visible bars are profiled (Dynamic composites) or a specific number of sessions are profiled (Rolling composites).
In any mode the composite profile can automatically mark prices of high and low volume on the chart with horizontal lines which extend all the way across the chart.


The profile on the left is the Range Profile drawing tool which can profile any section of the chart over any time frame for which you have data. It was not for the day before but where the market was balancing .


Interesting. I need to learn more about that type of market profiling. Thank you.

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  #526 (permalink)
MiamiBeach
Moscow, Russia
 
 
Posts: 1 since Apr 2021
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Hi guys! Thank you for this excellent thread! Thanks to JohnyBoy for his great VWAP guide!

I'd like to ask experienced traders about something we can add to VWAP considerations. Could you please shed some light on topic of market context?

Which specific factors that may affect VWAP setups a trader should analyze before day starts?

For example, yesterday high and low, yesterday POC, yesterday VWAP ending point? What else?

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