EDUCATION: Volume-Weighted Average Price
Hello, dear subscribers!
The next topic is the Volume-Weighted Average Price (VWAP) indicator. The vo;ume based indicators are very significant for full price movement analysis.
Definition
The VWAP is a measurement of ratio of value traded to total volume traded for the particular time period. The calculation formula is represented on the chart. This indicator helps to know whether the market is bullish (price above the VWAP) or bearish (below the VWAP) now.
How to trade with VWAP?
The classic approach to VWAP is the execution long position when the price clearly broke up over the VWAP, the short position - if the opposite is true. The 15 min timeframe is usually used but you can use shorter timeframes, but not longer. The VWAP is not good for the sole use because it generates a lot of fake signals, which need to be filtered with the another indicators. The particular strategy we will examine later.
Summary
1)Set 15 min or shorter timeframe
2)Long when price broke up the VWAP
3)Short when the price broke down the VWAP
4)Use another indicator for entry point confirmation
The next topic is the Volume-Weighted Average Price (VWAP) indicator. The vo;ume based indicators are very significant for full price movement analysis.
Definition
The VWAP is a measurement of ratio of value traded to total volume traded for the particular time period. The calculation formula is represented on the chart. This indicator helps to know whether the market is bullish (price above the VWAP) or bearish (below the VWAP) now.
How to trade with VWAP?
The classic approach to VWAP is the execution long position when the price clearly broke up over the VWAP, the short position - if the opposite is true. The 15 min timeframe is usually used but you can use shorter timeframes, but not longer. The VWAP is not good for the sole use because it generates a lot of fake signals, which need to be filtered with the another indicators. The particular strategy we will examine later.
Summary
1)Set 15 min or shorter timeframe
2)Long when price broke up the VWAP
3)Short when the price broke down the VWAP
4)Use another indicator for entry point confirmation
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