Are you using VWAP the RIGHT WAY?

what's up everyone all right so in today's episode i'm going to walk you through how to use the view app for day trading the view app is an acronym for the volume weighted average price and it's an incredibly popular day trading indicator i think almost every day trader out there uses it uh i suppose with the exception of maybe some traders who are using like some really obscure uh trading indicators but you know i'm a big advocate of using what other people are using because i kind of have this analogy that the whole reason traffic lights and stop signs work is because drivers use them and they understand the language of the of the road and the language of the financial markets is very similar it's we we are communicating with these charts and these charts are giving us very clear buy or sell signals through the chart patterns through the position of the indicators and so depending on which technical indicators you use if you're not using the volume weight average price you're actually missing what are at times very obvious resistance points or very obvious breakout prices so let's jump into the chart i've got the whiteboard i've got the charts up so let's go ahead and jump in and i'm going to go full screen here on the charts to just get started so i'll go on a five minute time frame and what i want to start with is just showing you how to add the volume weight average price to your chart i this is the layout that i use if i double click on any of my indicators i can pull them up here this charting software is called e-signal it's it's good it's not phenomenal but nothing is perfect anyways it's what i've been using for a long time so if i go to the plus sign i can search for um i think i could just search for view app and it's a built-in study right here yeah it's a built-in study so just like that i could click on that and i could add it to my chart but of course i've already done it here although let's just check to see what it said so originally used by investment funds and money managers this indicator has become increasingly significant to technical and day traders as it provides a way to determine the general direction of intraday prices this indicator is available both as a built-in study okay so i have made it orange but you could do whatever you want and i made it i made it a dotted line or a dashed line instead of a solid line but again that's just my personal preference but this is the way my charts will always look so anytime you're looking at my charts this is what you're going to see view app in orange dashed line and we're going to close it so the other indicators that you see on here on my charts i've got the the 9 exponential moving average which is this gray indicator this gray line right here and you can see how the price really does ride along that nine moving average as it goes up and then i have the 20 moving average as well which is in blue and you can see that on steeper pullbacks the stock does pull back to the 20 moving average so these are moving averages i really like they're both exponential and then the volume weight average price kind of fills in with sort of that final level so the volume weighted average price is like a moving average except that it factors in volume so traditional ema sma moving averages simple moving averages exponential moving averages what they are quite simply in a simple moving average is it's the average price over the last nine periods or whatever the period is that you're using if you're using a 20 or 200 it's the average price over those candles so if we look at a just sort of an example if you have a stock that goes up really quickly like this well the you know of course candlestick chart it goes up pretty quickly maybe pulls back for just a second and then goes up a bit more this is what the moving average would probably look like something like this and so the way it's doing it is it's saying well what was the average price you know here here here here here here here and just taking that average so this is the average price over the last you know 20 candles or whatever it is so you know 20 candle or average price and then divide by those 20 candles that's the average so it's it's always lagging a little bit behind the current price but one of the things that's a little bit tricky is that sometimes you'll have a stock that moves up very very quickly but it's on light volume and so the moving average is going to move with the price but it doesn't give you really a true reflection of what the average price is for the stock and so the volume weighted average price it's not used on daily charts it's only used intra-day and starting at 4am the beginning of pre-market it is the average price of the stock including volume so it adds this extra data point which is volume so you've got the price and then the number of shares so you know if you had just for instance you know a stock that had um you know a thousand shares you know at um you know ten dollars i don't know why i wrote that in reverse but um ten dollars a thousand shares and then you had uh let's say fifteen dollars and you had ten thousand shares right so 15 10 000 shares the average price is certainly in in traditional sma the average price is 12.50 right the average between the two if it was over a stretch of time if that was the beginning that was the end your average is 12.50 well clearly that's not the volume weighted average price because only a thousand shares trade at 10 whereas 10 000 were at 15. so the v web in this case would probably be like you know 14 i don't know whatever it is you know 1480 or something like that and this is valuable to know so if we look back at our chart the reason it's valuable is because it represents the volume weight average price the equilibrium point it is it is literally the average price of the stock over the day when you factor in all the volume and so it it tells us basically this is the equilibrium point for a stock and then we can look at that and we can say how extended is the stock off its average equilibrium price now the v app will go up and down throughout the day as the stock price changes but how extended is the current price overview app or below v web or when it's trading right at v web it's kind of like this slack it's like a slack line like you've got this it's it's actually a slack line of course it has tension but in this case it's like it's like a rubber band with no tension on it and the reason that's valuable is because it can be one of the strongest places to buy a stock when you buy a stock that's really stretched out and extended there's more risk of it snapping back right and you get that reversal and that correction coming back down if you're getting in when it's already really slack then that's where you're positioned with a lot less risk for an extension moving up where the tension starts to increase or a selloff coming back down so let's go back to our chart and i'll show you um a couple of examples here let's see um i'll just go full screen on this real quick so this is going to be a an example of volume weighted average price and you can see here this orange dotted line so the stock look look at how quick the volume weight average price moves up right here it moves up so much faster than the moving averages why it's because of the volume see the volume bars right there now if you're a trader if you're an active trader you know how important volume volume bars are we need volume we look at volume very closely so right in here those volume bars that's i mean yes you've got the stock moving up here but then all of a sudden the volume pulls it away and so the view app actually goes above the moving averages right and it stays above those moving averages through this area as the volume continues to be at relatively high prices but then the stock breaks below v web and it breaks below it on somewhat lighter volume but it is still below it so now this becomes a bit of a resistance point we're below this critical level it sells off and it comes back up to this sort of slack you know equilibrium price right here and this is a typical fade off the v web so the reason this is important what if you were buying it right here what if you're like oh i'm going to get in right here because it's kind of breaking over this pivot here and i think it's going to go back to the highs hold up you've got the volume weight average price resistance here and that is blocking the way while it's not impossible that we could break it is almost definitely going to see some resistance at this level so if you don't have up on your chart you're you're missing a very clear signal from the market that's saying this is resistance so it sells off again now it comes back up again and hits resistance right it hits it right there but notice what happens on this time right here it pulls back it holds that level and if it can break through that resistance this is what we always say with trading if a stock can break through resistance then that previous resistance becomes support and so in this case we've got we've got our dotted line which is the volume weight average price and the stock breaks through the v-wap right here all right so first it came up to the v web it then pulled back for one second right underneath this volume weight average price so it pulled back and then it breaks through what's very common is a break and then a retest so it comes back down and re-test this level and let's look at our chart you can see that that's exactly what happened on the chart it broke it on this candle and then the bottom candle wick right there can you see that bottom candle wick i know it's small but it came back and it retested that level so it came back it retested the v web and the previous resistance this level which was previously resistance right here and had already been tested earlier in the day now is becoming support now we can be a buyer right here at this level right in the air right in here right in here and this is your max loss your stop is now right below or right at the support level of the volume weight average price and now you have an opportunity and this is what you often see buyers come in right here and then we start to pull away why because they represent they understand that this represents new support and anyone who is short thinking that this would fade off the view app as it did earlier earlier it came up it tested v web and then faded the set and that's fine so some people will take this as a short position as a fade off view app that is a valid short entry you're shorting for a fade off v web okay fine but if it breaks v-wep you have two two things that could happen one is it breaks and it immediately reverses and so when that happens you get the break and then you get a rejection and it drops right back down and this candle ends up having you know whether it's on the fight it's usually on the five minute chart it ends up being a candle with a topping tail that pierced through the view app couldn't hold above it and drops back down false breakout that's a fantastic short on the false breakout all right your stop is now at the high versus being short for the breakdown below v web but the second thing that can happen is that it holds this level and when it does then that's where you get short covering here as it finally is breaking through what would be the stop for a short seller if they didn't have a stop right at v web now sometimes a short seller will stop as soon as it breaks they won't even wait for the risk that it could false break and go back in their favor because sometimes these will rip through so fast the v-wet breakout will go right into a halt and then all of a sudden you can have a stock going through the high and you know if we look at the price on this stock this went from 14 up to 16 bucks you know that's a solid squeeze on the break of v web now let's look at another example here this is one of the powerful ones okay so on this one here we've got the stock vwap of course you know right here the dotted line right again about 8 am a lot of volume comes in the v moves up very quickly it's actually between the 20 moving average and the 9 moving average stock pulls back to the 9 comes back up we get a double top pre-market and then coming into the open we fade we we catch support at v wap for a second but then it breaks below it tries to come back up and once again a very clear short fade off v web so it sells off and this move right here didn't really see it coming right all of a sudden it just comes up and rips right through that level it breaks the view app and look at the volume here now this is very high volume as it surges through vwap and the way this candle closed at the top right there tells us that that was a circuit breaker hull so the stock went from like 550 all the way up to over six dollars a share halted on resumption dip and rip now shorts are covering into this extension up to seven 758 829 high and just like that you've got 25 30 percent squeeze that's a v web fade and then a break of eweb now imagine if you didn't have the volume weight average price on your chart imagine that you this all would have happened and you would not have it on any understanding of the reason why we had such volatility at these levels let's put look back at the chart check this out we drop back down we bounce off the view app here and come back up all right so that right there was a dip off of the support of the volume weight average price and right here we bounce off it again and we can't hold the butt we we bounce off it we and then this becomes a bear flag and a no-brainer short for the fade and a really nice fade into the clothes so being able to see the v app the volume weight average price it does take some time with any indicator to kind of learn how to read it but this is a fairly simple one to learn how to read because these levels are so clear the stock is either above it or below it or it's coming up to it for a fade off of it or it's coming up to it for a possible break through it so these two examples are both perfect double top fade off v web right here uh double top fade off view app another fade off the view app so these become i mean once you start to see them you can't unsee them so i wanted to make this video fairly quick again just a quick video of how to use volume weighted average price as an indicator for day trading i hope this has been helpful if it has make sure you hit the thumbs up i hope you subscribe the channel you can always tune in and watch me during the live day trading morning show in the mornings monday through friday you can watch a ton of my old live trading archives and i'll put a couple videos right here i'll put one for my simplest day trading strategy right there which you should check out and i'll put another one right there if you want to keep watching some videos all right thanks as always for tuning in and i hope to see you in the next episode

Channel: Ross Cameron - Warrior Trading

Views: 205,542

Keywords: day trading, day trading strategies, trading strategies, how to day trade, beginner trading strategies, momentum day trading, stocks, trading, how to trade, stock trading, volume, Ross Cameron, warrior trading, day trade warrior, vwap trading strategy, vwap indicator, vwap, vwap strategy, vwap for day trading, vwap explained, vwap day trading, vwap trading, how to use vwap, vwap day trading strategy, what is vwap, how to use vwap indicator trading, vwap for beginners

Id: pSTHR41o6_k

Length: 15min 14sec (914 seconds)

Published: Sat Jul 23 2022