Welcome to NexusFi: the best trading community on the planet, with over 150,000 members Sign Up Now for Free
Genuine reviews from real traders, not fake reviews from stealth vendors
Quality education from leading professional traders
We are a friendly, helpful, and positive community
We do not tolerate rude behavior, trolling, or vendors advertising in posts
We are here to help, just let us know what you need
You'll need to register in order to view the content of the threads and start contributing to our community. It's free for basic access, or support us by becoming an Elite Member -- see if you qualify for a discount below.
-- Big Mike, Site Administrator
(If you already have an account, login at the top of the page)
I couldn't tell you why.. I had played around with Standard Deviation and noticed it wasn't plotting correctly. It was just drawing lines +1 +2 SD's above VWAP, when the chart I was comparing did not display that.
As with most things in the World of trading, that comes with a yes and no answer.
VWAP is the average price a security has traded at throughout the day, based on both volume and price. It is a simple calculation and therefore it allows funds to quickly determine if stock that has been bought/sold for them, was done so at (or near) a fair price for the day.
Liquidity is the passive volume of orders that is looking for buyers/sellers. You see them (not always) on the DOM or software like BookMap/Jigsaw Vista.
VWAP can act as an area of enhanced liquidity ie. if an institution has been told to transact large orders for clients, the client is going to want to know the institution has done their best to get a net fair price for them (often the compensation is measured against where the institution managed to transact). As such when price approaches the VWAP level, funds can increase the liquidity available around that area simply because any transactions at that level, will be deemed fair and they'll get rewarded. As such, large traders can attempt to bring price to VWAP to see if it brings in sufficient liquidity - in such a case, it could be deemed a liquidity hunt.
Under particular conditions trying to base VWAP evaluation as liquidity hunts may be misleading and even harmful to portfolio performance. Most institutional trading occurs filling orders that exceed the daily volume.
When large numbers of shares must be traded, liquidity concerns are against price goals. Then trade evaluation becomes more complicated. Action traders watch the market for this reason and try to benefit from those trades. A naïve investor could indiscreetly reveal her interest for the market or a particular stock. Action traders can then cut themselves in by capturing available liquidity and reselling it to an unskilled trader.
--------------------------------------------------------
- Trade what you see. Invest in what you believe -
--------------------------------------------------------
