Q/A: VWAP Trading Strategies Webinar

There were quite a lot of questions during my latest webinar dedicated to VWAP. You can read those questions and my answers here.

If you missed the webinar or if you would like to watch it again, then here is the recording:

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DATA

Q: What is the source of volume data on forex?

A: Forex is decentralized and this means we will never have the full and complete picture like if we were trading stocks, futures,… (these are centralized). The best way to get good volume data is to get it from a big data provider. Like for example the FXCM. NinjaTrader uses this data provider as the default for their forex data feed.

Using data from a big data provider gives us a pretty big sample of the market. I compare those forex volumes to future currencies (centralized) every day and I must say that their forex data is VERY CLOSE to the futures data. In most cases identical. This way I know I can depend on it.

Q: Are forex volumes reliable?

A: Quite surprisingly yes! If you have a good data feed like FXCM or Kinetick.

Q: Whose volume data is used in FOREX trading for the VWAP indicator?

A: I use FXCM data feed or Kinetick data feed. Both provided by NinjaTrader as a standard data feed in their NT8 platform.

Q: Do you use Tick data?

A: My software can use Tick data but it is not necessary. You can use for example 5-10 second data. The result you will see will be the same only it won’t need so much computer power.

SETTINGS

Q: Can I set the VWAP on a different basis – say a rolling 2hrs?

A: Sorry, my VWAP does not have this function. It was built the way I personally prefer to use it in my trading.

Q: How long do you wait for VWAP to develop when day trading?

A: 5 hours.

Q: That means if using Daily and trading intraday waiting the first 5 hours of trading, you have to discount almost the entire regular trading session each day.  No?

A: Yes, but these 5 hours are in the very calm Asian session, where I would not want to trade with VWAP anyways. For this reason it doesn’t bother me too much. Also, you can trade using the VWAP lines from previous day (dotted lines in my VWAP software).

Q: I cannot find the VWAP on the indicators of Ninja Trader. How can we add it to the chart?

A: VWAP is not a standard indicator you would find in NT8 trading platform. You can purchase this indicator or get it as a free gift if you enroll in my Elite Pack here: https://www.trader-dale.com/volume-profile-forex-trading-course/

Q: Must the computer be left on overnight for longer-term VWAPs to develop?

A: No need for that. My indicator will pull the historical data automatically.

Q: Does the time start overnight?

A: VWAP starts to calculate at the market open.

Q: My understanding is that VWAP uses the cumulative volume at price for its calculation, hence it will display same value on chart regardless of time frame or type of chart use eg. tick chart, renko, candle etc. Is this correct? 

A: Yes, you are right it will display the same values no matter what type of chart (or time frame) you use.

Q: Can I use VWAP with Renko charts?

A: Yes, you can use it with any kind of charts.

TIME FRAME

Q: What time frame is recommended for VWAP?

A: A cool thing about VWAP is that it is not dependent on time frame. It will look the same no matter if you use it for example on 15 Minute chart or on 60 Minute chart. My favorite setting is 30 Minute chart for Daily VWAP, 60 Minute chart for a Weekly VWAP, and a Daily chart for a Yearly VWAP.

Q: Do you only use 30 and 60 minute candles?

A: Yes, I use only 30 and 60 minute candles (for my intraday analysis). For me the most important thing is VOLUMES, and those don’t change with time frame.

Q: When the trades are in 2 Minute time frame, what is the recommendation of the market waiting?

A: I suppose you want to use the Daily VWAP for this. So, for the Daily VWAP it is 5 hours. This does not actually depend on the time frame you use (whether it is 2 Minute, 15 Minute or 60 Minute, …). What is important that you use Daily VWAP. This is what determines your “waiting period”.

Q: Can I use this setup in a 2 minutes chart?

A: Absolutely!

 Q: Why not have the calculations be continuous rather than break each day or each week? So for Daily settings use the past 24 hours of data, for a week the past 7 days of data etc.

A: The continuous would cause that for example the VWAP and deviations get really far from the current price and you would not have too many trading opportunities. What I want to reflect is the current situation.

TAKE PROFIT & STOP LOSS

Q: Where do you have your Stop Loss?

A: There are two ways I prefer to use to set my SL. First is a simple Fixed SL. This is around 10-20% of average daily volatility (measured by the standard ATR indicator). For example, if EUR/USD had average daily volatility 100 pips, then SL would be 10-20 pips.

The other way to determine your SL is to place it in a low volume area. You can learn about this approach in my Swing Trading webinar (you can apply this approach to intraday trading too):

https://www.trader-dale.com/swing-trading-with-volume-profile-webinar-learn-to-trade/

Q: Do you trail on a smaller time frame?

A: You can have a fixed Take Profit (fixed amount of pips) or you can take your profit at VWAP line. A third way is to take profit just a few pips before the price hits a heavy volume area standing in the way. I was talking about this in my Swing Trading webinar (you can apply this approach to intraday trading too):

https://www.trader-dale.com/swing-trading-with-volume-profile-webinar-learn-to-trade/

Trailing is also an option (I don’t do it though). Especially with the VWAP Trend Setup.

Q: Can I use the 2nd std deviation as a Take Profit in your VWAP Trend Setup?

A: You, can do it like this or you can use any of the methods I mentioned in my previous answer. Neither of them is better or worse. It is mostly a matter or what you prefer to use. For me personally it is a volume-based Take Profit.

OTHER

Q: What’s the difference between Dale’s and NT’s indicator?

A: I am not sure if NT VWAP can also be set as a Daily, Weekly, Monthly and Yearly. This important setting allows you to adjust your VWAP to your trading style (intraday, swing, long-term investing, …). My VWAP also comes with its own Video Course where I show you in detail how to use it. Also the price of my indicators is lower than NT license.

Q: Can you talk about when big money activity is hidden by off exchanges like Dark Pools?

A: When big money is traded in a Dark Pool, then it does not show in the data feed we use to do our trading analysis. I don’t think there is an easy way for a retail trader like us to track Dark Pool activity. In my trading career, I have never really felt like I am missing something by not being able to get Dark Pool data and volumes though…

Q: Does the Volume Profile and VWAP both work with NT7? I am still using 7.

A: My VWAP is only for NT8. I have Volume Profile for NT7 and I can give you that before you upgrade to NT8 (just shoot me an email to contact@trader-dale.com).

Q: Is the program CPU usage intensive?

A: It does not need too much CPU power. I runs smoothly even on older laptops.

Q: How do you determine breakout from these levels?

A: I don’t trade breakouts. I never really liked them nor did I found any edge in them.

Q: Do you just trade the currencies? Forex or currency futures on the exchange?

A: I trade currencies and some futures markets as well (ES, CL,…). But not as much as forex.

Q: What are the two Volume Profiles on your charts?

A: I use two types of Volume Profiles.

First, a Fixed Volume Profile (I use Fixed Daily and Weekly profiles for intraday trading, and Fixed Yearly Volume Profile for Swing Trading).

The second is the Flexible Volume Profile. I use this to look into specific areas in my charts. I use it for intraday trading as well as for swing trading.

You can learn more about those Volume Profiles here:

Q: Do these indicators (Volume and VWAP) only work with NT?

A: I currently don’t have VWAP for MT4 (but I plan to look into this and have it coded). Then I will probably give it for free to people who have already purchased the NT8 VWAP from me.

I have Volume Profile for MT4. You can check it out here:

That’s it guys! Thanks so much for your questions. I hope you liked the webinar!

If you have any more questions you can shoot me a message to contact@trader-dale.com.

Happy trading!

-Dale

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