Best Thread Vwap Engine

[leovirgo]

VE on EURGBP daily

This is Vwap Engine in its simplest form, i.e, on a daily chart. Use MDM and daily MACCI cycles to take directional trades. This is the strategic direction and the rules were already given in previous posts.

Once I've got that, I use the box mechanism, as shown in above post, for precise entry. There is no holy grail method but the holy grail for money management.

 

[leovirgo]

I am thinking of sharing my VE, anybody interested?

 

[leovirgo]

Once you all have it, you'll probably test and adapt it to your own way, at best, or dump it in your indicator store.

I think it would be nice if we can discuss here on this thread how we can add value to it, for example, how to place position sizing and money management (risk & profit) to trade with it.

 

[leovirgo]

Ok, five and counting.. I guess people are happy with their own methods, that's good in a way! It will be in Easy Language ELD file. It has to be TradeStation user.

 

[Trader333]

Leo,

Are you able to post it in ELS format ?


Paul

 

[trendie]

Ok, five and counting.. I guess people are happy with their own methods, that's good in a way! It will be in Easy Language ELD file. It has to be TradeStation user.

can you describe the formulas and rules? I am addicted to metatrader!

 

[leovirgo]

can you describe the formulas and rules? I am addicted to metatrader!

Oops, I've forgotten the formulas because I've already encripted the ELD file. Even then, it can be hacked, so they say on TS forums. Just kidding, most of the stuff is already available on this thread!!

TBH, I wonder

..why I should share VE with successful traders.
..what if someone resell my stuff without my knowledge

Why should a working method should be shared? I see no reason other than

.. for monetary gains should I charge for it [nope, not now at least]
.. simply helping inexperienced traders [sounds good] or
.. for the advancedness of TA studies..[duh..]

 

[leovirgo]

We've seen a good down move on NQ for last few days ( from 1794 to 1752 = 42 pts move). It is reversing today by breaking out above 1773 (m2).

 

[leovirgo]

I am honoured to see this thread being recommended as one of the best threads. Over the coming weeks, I will try to contextualise and summarise what have been discussed in the last fifty pages.

As for the sharing of VE, many of you wanted either open codes or EA written in MetaTrader which I can't accommodate for the moment. My initial thought was to hand out VE as TradeStation ELD indicator file- written for specific TS account number.

I've got an even better idea which is for me to post VE analysis for some of the markets everday.

 

[leovirgo]

NQ buy zone break out

US indices broke out to the upside after staying in the red for a while. I will NQ as an example.

Break out happened UK morning time (8am GMT, 3amET) so it is not for the day traders unless you trade during that time. Green + horizontal line is the target. Trailing behind a H1 bar that penetrated and closed above that level ( a method by TraderDante) worked pretty well for this trade.

 

[leovirgo]

GU for Dec '09

Plan for this month. Buy above 1.6600 and look to sell below that.

 

[leovirgo]

NQ : buy above 1794. (yMean)

Target 1810 (+16). TP1 is 1806 (+12)
Stop 1791.50(-2.5)

I'm not intending to do live calls here. So I won't bother with detailed entry and exits.

 

[leovirgo]

Let's do basics of VWAP ENGINE

I've decided to show how I use vwap in VE as I hope this will be helpful to TS users as well as those of you who are using any other platforms.

Feel free to ask any questions.

This is how I plot vwap on the chart.

1. Plot vwap for today (magenta, dynamic line)
2. Plot vwap for yesterday as a line (yellow horizontal line)

If vwap > yvwap then I call it 'strong day', weak day is just the opposite.

Strong day does not automatically mean a buy day.

Apple is shown as an example.

 

[leovirgo]

Re: Let's do basics of VWAP ENGINE

The next step is to determine 'supply and demand'.

Vwap is just an average price therefore it is similar to moving averages. Basic concept is that price will follow the path of least resistance.

In simple terms, price will 'move away' from vwap lines. There are times when price just comes back to vwap/mean area to balance supply and demand. But markets can't live in equilibrium all the time. So they 'must' move.

Practical points

I plot last three days' vwaps: yMean (yesterday's vwap) as a solid yellow line and m2/m3 as dotted lines so that it is easier to identify. In my observations, three day is enough but you can draw more if you want to.

Now our AAPL looks like this. For th first two three days, vwap lines were straight, then it moved lower.

MT users, can you do this?

 

[leovirgo]

VE process is already laid out in post #401 402. Nobody seems to be paying attention to them. I guess people will take it seriously only if it cost something to them.

 

[harry104]

Just a question: VWAP is a pretty standard indicator that comes for free with most charting packages. Technically you just need to find an anchor point, where you start the calculations: For ES you would use anything between the beginning of the night session and 7:00 AM ET. VWAP of the prior day / week would be used at support or resistance in a similar way you use fib lines, trend lines or floor pivots. Additionally it can be used as a trend filter

But the main point has not been mentioned. When there are large buying orders, big money uses algorithms to minimize market impact, and these algorithms will likely use the current session's VWAP as a benchmark. So I am watching out, how big money responds to the VWAP.

If also found this link, where I got some confirmation of my ideas. I am not related to these guys in any way, but just think it might be an interesting read.

http://www.precisioncapmgt.com/tag/anchored-vwap-bands/

My charts look similar as yours above, smoothed anchored VWMA of current session (attached to electronic trading session) and then horizontal line for VWAP of prior session, which I have integrated with my floor pivots indicator.

 

[leovirgo]

Just a question: VWAP is a pretty standard indicator that comes for free with most charting packages. Technically you just need to find an anchor point, where you start the calculations: For ES you would use anything between the beginning of the night session and 7:00 AM ET. VWAP of the prior day / week would be used at support or resistance in a similar way you use fib lines, trend lines or floor pivots. Additionally it can be used as a trend filter

But the main point has not been mentioned. When there are large buying orders, big money uses algorithms to minimize market impact, and these algorithms will likely use the current session's VWAP as a benchmark. So I am watching out, how big money responds to the VWAP.

If also found this link, where I got some confirmation of my ideas. I am not related to these guys in any way, but just think it might be an interesting read.

http://www.precisioncapmgt.com/tag/anchored-vwap-bands/

My charts look similar as yours above, smoothed anchored VWMA of current session (attached to electronic trading session) and then horizontal line for VWAP of prior session, which I have integrated with my floor pivots indicator.

I agree with you. Post #401 and 402 was the basics of Vwap Engine. It can be easily followed and constructed.

How do you know that every bounce or break through vwap is done by big money? Do they always win? I use simple price action. Why make another assumption about whether big money are short or long.

 

[harry104]

I agree with you. Post #401 and 402 was the basics of Vwap Engine. It can be easily followed and constructed.

How do you know that every bounce or break through vwap is done by big money? Do they always win? I use simple price action. Why make another assumption about whether big money are short or long.

I agree with you. If you want to know, whether large orders are being executed, you would have to apply a size filter to trades.

What I wanted to say is this: If a broker has a large (institutional or hedge fund) order and needs to execute this order, the broker will likely use an algorithm to minimize market impact. From the point of view of the broker's customer, she wants a good price for execution of the large order. So the customer will check the volume weighted average price in the end of the day and see whether she's got a better price. So VWAP essentially is a benchmark.

Let us take a large buy order. If the broker bought below VWAP, he bought at a reasonable price.
In a rising market, the broker will therefore try to buy just below VWAP, so you would expect the volume to rise. If VWAP is bought repeatedly, I assume (not knowing whether I am right) that larger orders might be executed, so someone trading a larger timeframe than myself is accumulating.

 

[leovirgo]

I agree with you. If you want to know, whether large orders are being executed, you would have to apply a size filter to trades.

What I wanted to say is this: If a broker has a large (institutional or hedge fund) order and needs to execute this order, the broker will likely use an algorithm to minimize market impact. From the point of view of the broker's customer, she wants a good price for execution of the large order. So the customer will check the volume weighted average price in the end of the day and see whether she's got a better price. So VWAP essentially is a benchmark.

Let us take a large buy order. If the broker bought below VWAP, he bought at a reasonable price.
In a rising market, the broker will therefore try to buy just below VWAP, so you would expect the volume to rise. If VWAP is bought repeatedly, I assume (not knowing whether I am right) that larger orders might be executed, so someone trading a larger timeframe than myself is accumulating.

You are repeating text book knowledge about vwap. There are some flaws in it.

Big orders do not necessarily means larger timeframe traders. It could also be prop traders taking short term trades.

What's the practical use of knowing that someone is accumulating? Would you also go long? Do you know when and where big orders will be liquidated? They could also be trapped should the price reversed.. etc.

I would try to avoid abstract interpretation of price action. The less the number of assumptions, the better it is for decision making. It's fine if it works out for you. Keep doing that.

 

[harry104]

You are repeating text book knowledge about vwap. There are some flaws in it.

What's the practical use of knowing that someone is accumulating? Would you also go long? Do you know when and where big orders will be liquidated? They could also be trapped should the price reversed.. etc.

In the end, it means: If prices are above VWAP of current session and if VWAP of current session is higher than VWAP of the previous session, I would look for buying a retracement to current VWAP, if confirmed by other indicators. If this happens repeatedly, much the better.
:cheesy: