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ifish VWAP
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DISCLAIMER:
The Following indicator/code IS NOT intended to be a formal investment advice or recommendation by the author, nor should be construed as such. Users will be fully responsible by their use regarding their own trading vehicles/asset
Volume weighted average price (VWAP)
Calculating VWAP
Choose your time frame (tick chart, 1 minute, 5 minutes, H1 etc.)
Calculate the typical price for the first period (and all periods in the day following). Typical price is attained by taking adding the high, low and close, and dividing by three: (H+L+C)/3
Multiply this typical price by the volume for that period. This will give you a value called TP*V.
Keep a running total of the TP*V values, called cumulative TPV. This is attained by continually adding the most recent TPV to the prior values (except for the first period, since there will be no prior value). This figure should get larger as the day progresses.
Keep a running total of cumulative volume. Do this by continually adding the most recent volume to the prior volume. This number should also get larger as the day progresses.
Calculate VWAP with your information: cumulative TPV/cumulative volume. This will provide a volume weighted average price for each period and will provide the data to create the flowing line that overlays the price data on the chart.
The VWAP identifies the true average price of a stock by factoring the volume of transactions at a specific price point and not based on the closing price.
How to trade? Essentially, you wait for the market to test the VWAP to the downside. Next, you will want to look for the market to close above the VWAP depending the TF you are trading.
Above VWAP bullish
Below VWAP bearish.
You might choose your desired deviations by entering different inputs, once values are crosses depending bullish/bearish cross, VWAP will color flip red/blue. [Mainly you wanna see the bullish market trading above VWAP,] color flip will be additional confirmation when market due to drop below VWAP line.
What Does Volume Weighted Average Price (VWAP) Tell You?
Large institutional buyers and mutual funds use the VWAP ratio to help move into or out of stocks with as small of a market impact as possible. Therefore, when possible, institutions will try to buy below the VWAP, or sell above it. This way their actions push the price back toward the average, instead of away from it.
Retail traders tend to use VWAP more as a trend confirmation tool, similar to a moving average. When the price is above VWAP they look only to initiate long positions. When the price is below VWAP they only look to initiate short positions.
The Difference Between Volume Weighted Average Price (VWAP) and a Simple Moving Average
On a chart, VWAP and a moving average may look similar. These two indicators are calculating different things.
VWAP is calculating the sum of price multiplied by volume, divided by total volume.
A simple moving average is calculated by summing up closing prices over a certain period (say 10), and then dividing it by how many periods there are (10). Volume is not factored in.
While some institutions may prefer to buy when the price of a security is below the VWAP, or sell when it is above, VWAP is not the only factor to consider. In strong uptrends, the price may continue to move higher for many days without dropping below the VWAP at all or only occasionally. Therefore, waiting for the price to fall below VWAP could mean a missed opportunity if prices are rising quickly.
The Following indicator/code IS NOT intended to be a formal investment advice or recommendation by the author, nor should be construed as such. Users will be fully responsible by their use regarding their own trading vehicles/asset
Volume weighted average price (VWAP)
Calculating VWAP
Choose your time frame (tick chart, 1 minute, 5 minutes, H1 etc.)
Calculate the typical price for the first period (and all periods in the day following). Typical price is attained by taking adding the high, low and close, and dividing by three: (H+L+C)/3
Multiply this typical price by the volume for that period. This will give you a value called TP*V.
Keep a running total of the TP*V values, called cumulative TPV. This is attained by continually adding the most recent TPV to the prior values (except for the first period, since there will be no prior value). This figure should get larger as the day progresses.
Keep a running total of cumulative volume. Do this by continually adding the most recent volume to the prior volume. This number should also get larger as the day progresses.
Calculate VWAP with your information: cumulative TPV/cumulative volume. This will provide a volume weighted average price for each period and will provide the data to create the flowing line that overlays the price data on the chart.
The VWAP identifies the true average price of a stock by factoring the volume of transactions at a specific price point and not based on the closing price.
How to trade? Essentially, you wait for the market to test the VWAP to the downside. Next, you will want to look for the market to close above the VWAP depending the TF you are trading.
Above VWAP bullish
Below VWAP bearish.
You might choose your desired deviations by entering different inputs, once values are crosses depending bullish/bearish cross, VWAP will color flip red/blue. [Mainly you wanna see the bullish market trading above VWAP,] color flip will be additional confirmation when market due to drop below VWAP line.
What Does Volume Weighted Average Price (VWAP) Tell You?
Large institutional buyers and mutual funds use the VWAP ratio to help move into or out of stocks with as small of a market impact as possible. Therefore, when possible, institutions will try to buy below the VWAP, or sell above it. This way their actions push the price back toward the average, instead of away from it.
Retail traders tend to use VWAP more as a trend confirmation tool, similar to a moving average. When the price is above VWAP they look only to initiate long positions. When the price is below VWAP they only look to initiate short positions.
The Difference Between Volume Weighted Average Price (VWAP) and a Simple Moving Average
On a chart, VWAP and a moving average may look similar. These two indicators are calculating different things.
VWAP is calculating the sum of price multiplied by volume, divided by total volume.
A simple moving average is calculated by summing up closing prices over a certain period (say 10), and then dividing it by how many periods there are (10). Volume is not factored in.
While some institutions may prefer to buy when the price of a security is below the VWAP, or sell when it is above, VWAP is not the only factor to consider. In strong uptrends, the price may continue to move higher for many days without dropping below the VWAP at all or only occasionally. Therefore, waiting for the price to fall below VWAP could mean a missed opportunity if prices are rising quickly.
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Tom DeMark & Fibonacci & Harmonics & Fisher Transform, Renko. Kagi, PA ,Chart Patterns trader
Tom DeMark & Fibonacci & Harmonics & Fisher Transform, Renko. Kagi, PA ,Chart Patterns trader
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