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ES and the Great POMO Rally


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ES and the Great POMO Rally

  #271 (permalink)
 
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 Private Banker 
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Fat Tails View Post
Afterwards the price action always looks meaningful. But were you able to predict, that the VWAP would win against the pivot range?

What I was referring to is more from a portfolio management perspective of establishing a short bias (or adding to one) with your trades achieving VWAP.

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  #272 (permalink)
 
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 trendisyourfriend 
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Private Banker View Post
One thing I noticed in all the Equity indices today was that price was being sold into every time it touched VWAP. That usually is a hint that someone is establishing a short bias with the exception of this morning's initial move. If I were looking to add to my short position today, I would have been selling the VWAP every time.
...

That's a logical observation but at what point did you realise that ? firts, second or third time it occured ?

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  #273 (permalink)
 
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trendisyourfriend View Post
That's a logical observation but at what point did you realise that ? firts, second or third time it occured ?

Well, let me first say that I wasn't trading ES today but was trading CL. But I noticed this morning that equities hit the top of it's range and did not break out. At around 11AM EST +/-, I noticed that there were signs of selling taking place at the VWAP. Sold off slightly came right back up and got sold into again. This continued several more times before finally falling through the bottom of the day's range.

This is by no means a guarantee for a sell off or that many are building a short bias. It's just something that I would do if I were adding to my short position. I'm still swing short but at a reduced amount. I would like to see more selling before I start adding to my position.

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  #274 (permalink)
 
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 trendisyourfriend 
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Fat Tails View Post
Afterwards the price action always looks meaningful. But were you able to predict, that the VWAP would win against the pivot range?

Typically (and this is a classical Market Profile setup) when there is range extention (at least 4 ticks above/below the initial balance) and at 1:00pm EST, price opens within 1 point from the POC and does not go in the oposite direction of range extention then your best bet is to go in the same direction as range extention after 1 pm. The 1min opening range has acted as an area of resistance along with the open of the day session (RTH).

It's also interesting to note where price went (Thursday's POC at 1302).

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  #275 (permalink)
 
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 tigertrader 
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trendisyourfriend View Post
Typically (and this is a classical Market Profile setup) when there is range extention (at least 4 ticks above/below the initial balance) and at 1:00pm EST, price opens within 1 point from the POC and does not go in the oposite direction of range extention then your best bet is to go in the same direction as range extention after 1 pm. The 1min opening range has acted as an area of resistance along with the open of the day session (RTH).

It's also interesting to note where price went (Thursday's POC at 1302).

Yes it's one of the 80-20 rules, I believe. It also doesn't hurt that today is T+3, prior to Q1 settlement, and it was a big up month.

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  #276 (permalink)
 
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 tigertrader 
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Private Banker View Post
What I was referring to is more from a portfolio management perspective of establishing a short bias (or adding to one) with your trades achieving VWAP.


Don't you think it would be wiser to or add to your shorts @ +2SD-3SD, and add to your longs @ -2SD-3SD, especially on a day when there is neither a negative nor positive slope to the VWAP line?

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  #277 (permalink)
 
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tigertrader View Post

Don't you think it would be wiser to or add to your shorts @ +2SD-3SD, and add to your longs @ -2SD-3SD, especially on a day when there is neither a negative nor positive slope to the VWAP line?

Yes, that's definitely possible. When I managed money, whenever we were establishing positions or adding, it was generally around the VWAP (regardless of the slope) which is why I always watch it. I know a lot of big orders are likely to be taking place there.

Now that I only manage my own money, using the VWAP isn't the only way I would look to add to or establish a position however it can certainly be an effective way to do so.

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  #278 (permalink)
 
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Private Banker View Post
Yes, that's definitely possible. When I managed money, whenever we were establishing positions or adding, it was generally around the VWAP (regardless of the slope) which is why I always watch it. I know a lot of big orders are likely to be taking place there.

Now that I only manage my own money, using the VWAP isn't the only way I would look to add to or establish a position however it can certainly be an effective way to do so.

I'm sorry, but I'm missing the logic behind your statements. The VWAP is simply the average price of a security traded over a period of time. It is essentially a benchmark for investors that want to be passive in their execution, and are seeking the average price based on volume, i.e., a guaranteed VWAP execution. The implementation of the VWAP was in response to the decimalization of the market and the proliferation of algorithmic trading that resulted from this change, and became popular as a tool to reduce transaction costs and the impact of large institutional orders on the market.

As an active trader/ investor, I don't understand on how the VWAP would offer you any advantages in the timing and placement of you entries or you adds, from a position trading/portfolio management perspective. On the contrary, I would be looking to execute my trades as far away from the VWAP as possible, i.e. plus or minus 3 standard deviations away, or S3/R3.

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  #279 (permalink)
 
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tigertrader View Post
I'm sorry, but I'm missing the logic behind your statements. The VWAP is simply the average price of a security traded over a period of time. It is essentially a benchmark for investors that want to be passive in their execution, and are seeking the average price based on volume, i.e., a guaranteed VWAP execution. The implementation of the VWAP was in response to the decimalization of the market and the proliferation of algorithmic trading that resulted from this change, and became popular as a tool to reduce transaction costs and the impact of large institutional orders on the market.

From the perspective of an active trader/ investor, I don't understand on how the VWAP would offer you any advantages in the timing and placement of you entries or you adds. On the contrary, I would be looking to execute my trades as far awy from the VWAP as possible, i.e. plus or minus 3 standard deviations away, or S3/R3.

Exactly, I wasn't speaking from the perspective of an active trader/investor. I was speaking from the perspective of a fund manager who is looking to put capital to work. From an active retail investor perspective, I can definitely see your point.

Let me explain in more detail what I was referencing. Let's say your fund is looking to become more short bias or put additional capital to work, you're likely to place those orders near VWAP. You aren't concerned with the intraday moves as much as you are with the overall big picture. Your trading criteria is derived from a daily/weekly chart interval with a long(er) term objective. The intraday standard deviations aren't as important when you're working with bigger picture standard deviations that are more annual based and asset class based. You aren't going all in on one trade but you're gradually getting your orders in near the VWAP.

So, to circle back from what I originally said in observing price being sold at VWAP several times today. My thought is there could be some big orders being placed at those levels by large institutions. It's just a thought of course and who knows what will happen for sure.

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  #280 (permalink)
 
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Private Banker View Post
Exactly, I wasn't speaking from the perspective of an active trader/investor. I was speaking from the perspective of a fund manager who is looking to put capital to work. From an active retail investor perspective, I can definitely see your point.

Let me explain in more detail what I was referencing. Let's say your fund is looking to become more short bias or put additional capital to work, you're likely to place those orders near VWAP. You aren't concerned with the intraday moves as much as you are with the overall big picture. Your trading criteria is derived from a daily/weekly chart interval with a long(er) term objective. The intraday standard deviations aren't as important when you're working with bigger picture standard deviations that are more annual based and asset class based. You aren't going all in on one trade but you're gradually getting your orders in near the VWAP.

So, to circle back from what I originally said in observing price being sold at VWAP several times today. My thought is there could be some big orders being placed at those levels by large institutions. It's just a thought of course and who knows what will happen for sure.

Cheers,
PB

My point exactly -you're not CalPERS, you're not managing a gazillion dollars, or putting on the kind of size that has to be sliced and diced and insured a "fair" fill basis the average price. As an individual trader (trading your own capital) you want to buy as low as possible, and sell as high as possible - not the average price of the two extremes.

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