The Complete Vwap Strategy

[Trader333]

Tony,

1) You need an "uptick" to be able to short a stock which may not happen at the price you want.

2) Some stocks are not allowed to be shorted

3) At certain times it is possible that you wont be allowed to short a stock and this has happened to me as well as others on a frequent basis. It is usually because there is a large portion of the stock already shorted.

Of course this never happens when wanting to go long


Paul

 

[TheBramble]

2) Some stocks are not allowed to be shorted

Will these non-shortable stocks be obvious in that I simply wont be physically able to short them or is there a list somewhere?

Reason for asking is that I understand LII does technologically 'allow' you to do things which aren't legally allowed from the exchange perspective.

 

[Grey1]

fow,

Pair Trade during the oscillation period and as much as you can .. This will eliminates the effect of sinking lower.. Remember when stock hits the lower VWAP and sinks even further the other stock on the upper VWAP should fall a lot more because higher beta stocks fall faster ,, This is what Paul's trade few days back was all about..


I have now sent you MACCI this should help a lot too.

let us know how you get on ..

 

[darrenf]

The figure 1.5 is the minimum .. As long as we are not trading with less 1.5 we should be safe.. In most cases R/R will be much higher.. in fact the higher the better.

Grey 1. Sorry to raise this question again but I am still not sure I understand.

If the strategy says buy at lower vwap and sell at vwap, with stop 2/3 of potential reward, surely the R:R is always 1.5:1?

In order to get higher profits than 1.5:1, you either have to use a tighter stop or leave the position open to run beyond vwap and take a profit at some higher level, perhaps by employing a trailing stop?

I am not questioning the fact that higher than 1.5:1 is acheivable as clearly it is from the posts of trader333 and Davegos, but how is significantly greater than 1.5:1 acheivable if following the system outlined in the first post where you either take profits on all or the vast majority of the position when the price hits vwap, and always employ a stop of 2/3 potential reward?

 

[Grey1]

Darren,

This is why I have asked you to let 1/4 run if you want.. .I leave the money management of the trades to each individual as we all have different target, and different capital .. A colleague of mine closes 1/2 @ VWAP and has a trailing stop for any momentum run above the VWAP ..

As a rule we close @ VWAP .. This is the minimum requirement not to let a good trade turn into a bad one ...

If you let 1/4 or 1/2 run on a trailing bases then your R/R could be much higher than 1:1.5.

Hope this clears..

 

[darrenf]

Yes, thanks for the reply.

Looking forward to seeing some examples of trades on this thread.

 

[Trader333]

Tony,

You wont be able to Short non-shortable stocks as the software prevents it.


Paul

 

[fowkesp]

Grey1,

Thanks for the MACCI code - I will check out the signals during the next session.

Reading some of the recent posts it seems there are different ways of assessing risk/reward, seemingly dependent on where the stop is placed.

Although I haven't tried any of this yet, my inclination for single directional trades would be to enter once the price is moving back inside the vwap band (obviously keeping an eye on Level2) at a point where I can use a recent pivot low as a stop (or loh/hod), and only take the trade if the risk/reward from the stop price to vwap price is to my liking, eg >2:1. Anyone use this method?

For pair trades, I'm not sure how best to assess risk/reward. Should both trades be assessed individually? Or because we are broadly market-neutral, should we just use a money stop based on the net pair position? If so, how do we calculate a reasonable value for the stop?

Sorry about the number of questions

Paul

 

[Grey1]

FOW,

The fine tuning part of the strategy is important and my Guidelines are sufficient for a good trade.. A basic knowledge of L2 will help a lot as well as the correct use of MACCI.. Paul waits for price to come back into the bands,.. This is also a good approach ...

For pair trade you assess all trades individually ..

 

[TheBramble]

fow - your risk is directly proportional to your stoploss - it's precisely the factor you use to calculate your stoploss.

Setting your stoploss is the only edge you get in trading to decide the maximum you want to risk on the trade.

You can only estimate the reward, but the risk is completely assessable prior to taking the trade and (subject to slippage) totally in your control.

As for pair trading (which I have yet to trade) if you exit one side either through target or stoploss being hit, wouldn't you need to exit the other side as well regardless? Otherwise, you're no longer market neutral and you have exposure.

 

[ianp]

Hi Grey1,

thanks for these posts they are very useful.

I am interested in how you use Level2 and it would
be good if a we were all watching the same stock at the
same time to see the differenent interpretaions of the
same L2 screen.

Ian

 

[fowkesp]

Tony,

I'm coming from a different angle because, unusually, the reward side of the equation is well-defined - it's the vwap price. So I am proposing only entering trades when the distance to a chart-based stop (recent pivot) and the distance to the target vwap give a risk/reward ratio I am happy with.

Paul

 

[Grey1]

I will be long INTC @ 30.30 when and if it hits with 15 C stop.

Can not find a short trade yet but I will post this any way .. All my stocks are trading around or belwo VWAP.

 

[Grey1]

just one note:- I am only tracking 40 stocks at the moment as my original scanner is out of operation due to my previlages removed by realtick ( due to the leak in the scanner I am told ) so I am stuck with IB's resitriction ..As soon as I am all sorted then I be having much mch more choice .. ( I am told be another 2-3 weeks )

Mean while INTC is trading @ 30.50 now. I am not in the trade yet.

If you are using esignal or other data vendor you should be getting much more signal than me..

 

[DaveGos]

Short GILD 56.25

 

[Trader333]

Nice One Dave,


Paul

 

[DaveGos]

Covered 55.85

 

[keano]

you're the man Dave

 

[Trader333]

I think there is more to be had in this trade, there is still 20c to vwap, a good trade nontheless though.


Paul

 

[Grey1]

INTC has now met its VWAP target even though I did not get my price but the reversal was around the time I posted the trade..

My entry price was 8 C below the market and that was the compensation I was expecting to get from smart router filling my trade at an average .. If you trade a large size you be having this problem even if you go limit ..

Mean while GILD is trading @ 55.84 Excellent call Dave.