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I have been stalking this thread for some time and since there has been some reference to software/settings etc. I thought readers might be interested in my software setup, one screenshot of which is shown below
Obviously the screenshot is of candlesticks (10 minute bars) with volume along the bottom and Volume Profile displayed as the horizontal histograms. The background heatmap shows normalised Volume Profile with the "current" POC being the bright yellow horizontal bar. The blue and red horizontal lines are the value lines wihin which approx. 70% of the Volume Profile histogram lies. The red bands that follow price are the VWAP and the plus/minus 1 Standard deviations, including the Standard error of the VWAP. This standard error is the ubiased error of a weighted moving average, i.e. VWAP.
The charts begin at the close of business 17:00 EST and the vertical green line shows 07:00 BST (London open). As the charts update other vertical lines will appear showing 07:00 EST (New York open) and 17:00 BST (London close) to easily distinguish between different trading sessions.
It is not my intent to criticise trading software per se or users thereof, but as readers can see it is not necessary to spend any money on trading software or monthly subscriptions to an online charting service. Of course I realise that coding the sort of thing above is not everyone's cup of tea, but for those traders who wish to "cut their losses," cutting charting costs is one option. I know that Octave is not a mainstream choice for this; perhaps the Python language https://www.python.org/ or R https://www.r-project.org/ would be better for most because of the greater availability of trading specific software add-ons/frameworks.
What up @JonnyBoy !
Hope you've been doing well! So, I've been putting some time into SIM trading/live trading these VWAP setups and I've come across some situations that have left me scratching my head. Hoping you could help, if you're able/willing, explain how you approach these types of scenarios.
This screenshot shows one VWAP test long (#1) and SD continuation long (#2).
I've come across instances where price will wick into the bands signaling a particular setup and quickly move out in the intended direction never moving back into the band to present another opportunity to buy/sell. I'm wondering if all conditions are met are you taking that trade the moment price touches inside band and then comes out? It can happen in a flash and I've been left out at times sorta just sitting there like "uuhh well damn" - for now I've tried to just take those trades if all market conditions are met and been feeling like I might not be allowing price to show me if the setup is invalid. (ie: price wicks into band and then back out towards my target, but only to break down and hit my stop shortly there after; I'm just thinking I'm being too quick to take the trade?)
This screenshot shows an example of what I was talking about. #3 shows price entering the VWAP band and quickly coming back out towards target. I took the long trade as we've been trending up all morning, had a sell off from 10:15 till the moment I took the long trade at 10:50 or so. It failed and price ultimately found OTH VWAP as support. Should I be giving price more time to show me if the setup will be invalid in these instances? #4 I actually took a long trade here and viewed it as a SD reversion long following my previous bias.
#5 is a SD continuation long. This question revolves around moving targets/stops. As price trends up/down the bands, VWAP and SD's will slope up and down. My question to you is, do you keep your targets/stops set while in a trade? Or do you dynamically move the targets as the VWAP/SD bands are changing/sloping up and down? In this example trade #5 if I were to dynamically move my stop up tick by tick hugging the bottom part of the SD band I would be stopped out. But if I kept my stop the same at the point of entry, not touching it, I would have hit my T1. Just curious if you move these around and keep them fluid inline with VWAP/SD sloping up & down or static.
As always, your time and knowledge are helpful and I greatly appreciate it!
I'll try. What is your data series? And your charts are from yesterday's session (June 22nd)?
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- Trade what you see. Invest in what you believe -
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I don't know if this is a $64,000 question or a $1,000,000 one. I used picture perfect examples to explain the concept, but reality is akin to navigating through a grey fog. Sometimes we meet a clearing and other times we can't see a damn thing. So, RE: (#1). On your data series (and mine actually) price only wicked into the envelope, literally by a smidge. A more granular tick chart will not help you here in instances like this.
Due to the way my data series works, I had some distinct advantages here; An anchored VWAP from the most recent swing low (orange dash-dot line). Placing an anchored VWAP on the swing low of 1234 tick chart doesn't help you here. We also had VWAP itself and underneath all of that was the ETH VWAP. I also have programmed in VWAP dots that tell me if the market is currently VWAP long or VWAP short regardless of price being above or below it.
#1
But, let's remove those "advantages" and look at #1 from the perspective of your 1234 tick chart. The first word that springs to mind is tricky. The market had just found buyers and the trend from down to up had potential but no confirmation yet. Some traders would have been caught out on the VWAP TEST SHORT, but this was right at the ETH VWAP so should have been avoided. So, with #1 you missed it and that is just that. It wasn't clear nor obvious.
#2 was a slam dunk. It was a perfect 2nd entry long on your chart. Now you could argue that #1 was also a 2nd entry long (albeit on the same bar) but the profit targets were tight. However, with #2 and the way the market had postured itself, the probabilities for continuing the upward trend were good.
I do prefer actual touches of the VWAP and SD lines, but sometimes the market is in such a hurry it just doesn't. Probability wise however the chances of it tagging that SD line and VWAP later in the session are higher. Presuming of course the open wasn't a bullish Open Drive in which case all bets are off.
With this in mind for your trade #3 you were anticipating the same thing would happen as the missed trade #1. In that the VWAP envelope was wicked, you entered only to get caught out by a losing trade because price actually touched and penetrated VWAP this time around! And where did price bounce? Right at the ETH VWAP, which isn't shown on your chart. This was also exactly a 61.8% retracement from the current day swing high to low.
If you had waited for a VWAP touch, you would not have got caught out. BUT, there was also a second entry long at VWAP which could have been tempting. So maybe just one of those trades that failed.
#3
I like your logic here for #4. That was a good entry based on a VWAP CROSS from a bounce off the ETH VWAP (although you were not aware of this at the time, or maybe you were) and that 61.8% retracement. If you had held a running contract you could have probably paid for the loss you just took.
In general I place my targets at the price the SD bands were at on the bar in which I enter. Else, you'll be continually nudging them and may not get filled. The only exception is holding a running contract which I might just keep nudging as the trade is working.
As for moving the stop (as long as we are not talking about adding additional breathing room), too early can really eat into your potential profits. Too late and you miss the profit. This is really down to the individual trader and your risk profile. I can't really give you a good answer to this one.
In addition, late day expansion of the VWAP bands really leaves you with a predicament. It will project really good/profitable targets from your entry, but if the average range of these types of trades is 3 points, why would the market suddenly do 7 points? Mmm, perhaps I haven't explained that well enough. Think ATR. And how you could use it.
There were 3 points on offer for trade #5 I believe.
I have to run and I might make some edits to this post if I get the time. I haven't read through it yet...
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- Trade what you see. Invest in what you believe -
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Assuming this isn't part of your proprietary secret sauce, may I ask what you mean when you say the market is VWAP long or VWAP short? And in this statement are you referring to ETH or RTH VWAP?
Hey @JonnyBoy
Thanks for the insight on this! I appreciate it.
Definitely a challenge navigating these setups in certain instances but I am doing my best to apply the context of the day and realizing what type of market conditions we're seeing.
In regards to the anchored VWAP - why would that not work on a regular tick chart?
I know this comment is over a year ago. I'm an avid scalper. I make my entire income from trading futures. Scalping to "me" is the ultimate risk management style of trading. VWAP is critical to my trading process. I have developed some custom scripts that I use to sync Bookmap and NT8 and part of the sync process is based around VWAP. I don't connect Bookmap to NT8 to make trades but more so I can see investor volume, investor type/class and size (iceberg and various sizes that I have funny names to specify size) in NT8. Its still a work in progress. I have Bookmap and Tradingview working very smoothly but sadly TradingView's API development is slower than ice melting on the North Pole.
VWAP is a huge part of the math that makes Bookmap so amazing, and combining all that yummy data into NT8 seems like a winning strategy. I have been dreaming about creating the dream retail platform. Problem is some of my developer friends are senior management for the biggest companies in the world and to bring them onto such a project would easily cost $200-$300k a year in salary for such top talent. It would be hard to imagine a $10 million development budget in todays times :-) I can dream :-)
