Volume-weighted Average Price (VWAP) is an indicator that provides the average price in a trading session, using both price and volume.
VWAP is calculated by taking the dollar value of trading in any given asset and dividing it by the volume of trades during that session.
The indicator will do all of the calculations for you. But for those interested, the formula is as follows:
VWAP =
∑ Volume
___________
∑ Price * Volume
VWAP can be used as an additional confluence for trade entries, as it will locate areas where high volume has been transacted.
This can be useful for filling large position sizes with little slippage.
Of course, there are additional benefits and uses for VWAP as you will discover in this tutorial.
Time Stamps
1:53 – BAT/BTC Previous Chart Of The Week (DO NOTE TRADE THIS)
7:55 – VOLUME WEIGHTED AVERAGE PRICE (VWAP)
- It is an S/R line
- It is nice because it incorporates price and volume which we love to trade off of
- It is good to enter with a bigger position at the VWAP because there is a lot of volume transacted and you can fill a bigger position with little slippage
- VWAP is brilliant for scalp trading
- It is good for scalp and swing trades
- HTF VWAP is a very strong S/R line
- When the price is above VWAP it is ‘above value’ and when it is below VWAP is it ‘below value’.
- When the HTF VWAP (yearly) gets touched for the first time after trending one would expect a strong reaction. Context is very important
- Weekly VWAP is a level that gets interacted quite often
- Daniel uses session VWAP but is aware of Weekly VWAP too
15:53 – EXAMPLES
- When VWAP is lining up with another confluence such as Fibonacci or POC it gives great trades
- When scalp trading you have to be very strict, no emotions.
- VWAP works extremely well with VAH, VAL, POC, CC
35:15 – LIVE EXAMPLES ON TV
- VWAP Anchored is a nice feature on TV. If there is a very big reference level (the significant low or high) this tool gives you VWAP of that
40:16 – Q&A
- If possible is best to get into position at limit order, especially if you are scalping tiny range. If the move is a bit bigger it is acceptable to enter at market
- Daniel does pre-set orders if there is good confluence for him. When price breaks through VWAP it is ‘expected’ to hold for (at least) the first touch if there is another level of confluence (CC/POC etc.).
- VWAP lags behind PA so it is more likely to see price in a trending market to get a VWAP off of CC then the .382. It is lagging indicator, it cannot predict price
- If Daniel goes for tiny moves his invalidation can even be 1 dollar, he is tight on his invalidations, especially if he buys at market
- On Exocharts Daniel scalps these moves on volume chart, on TV is ok to trade on 3-5 minute chart
- On Exocharts VWAP is always set as session
- For swing traders Weekly and Daily VWAPs are useful
- Daniel likes to build statistics by recording present time than checking what happened in the past – if something happened in the past it does not mean it will be keep on repeating.
- In crypto session refers to 12pm UTC to 12 pm UTC (one day is one session). In stock market session is from open to close of the market.
- Daniel does not use Weekly VWAP tool for trading but he is aware of it, he likes to know where it is, because it is a big S/R level. He would never take a trade off of it.
01:05:05 – RECAP