ūüĒīWEBINAR: How to Trade with VWAP in 2024

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Video Transcript:

Hello, everyone! It’s Dale here. I’m excited to have you here today on this webinar where we will talk about VWAP trading. Thank you for joining us, and let’s get started.

Now, if you guys remember, I promised you a gift, and here it is. It’s a brand new book about VWAP trading. It’s called “VWAP: The Insider’s Guide to Trading” and you can get it for free at the address below the picture. I also dropped it below the video description, so you can get the book for free there. If you want a printed version of the book, you can get it on¬†Amazon, but on Amazon, you’ll need to cover the printing and shipping cost. However, if you want the ebook, you can download it for free at this address.

Alright, now in this webinar, here¬†is what you will learn. First, we’ll cover some VWAP basics, like what VWAP is,¬†how it differs from other standard indicators, and why it works. Then we will¬†cover VWAP trading setups. Next, we will cover combos of multiple trading¬†setups. We will cover take-profit and stop-loss placement, and we will cover¬†money management. If you have any questions, leave them in the chat, and I’ll¬†try to answer them as we go or at the end of the webinar.

Alright, so VWAP stands for Volume¬†Weighted Average Price, in other words, an average price that takes into¬†account the trading volume. So VWAP tells us where the average trader placed¬†their orders. Because of this, VWAP is a great reference point for traders,¬†right? Because it’s showing the average trader.

Now, here is the difference between¬†VWAP and standard average indicators, like, for example, the simple moving¬†average or the exponential moving average. If you look at those and their¬†calculation, they only use time and price in their calculation, right? But VWAP¬†uses time, price, and volume. And volume makes all the difference because,¬†through volume, we track the big trading institutions that move and manipulate¬†the markets, right? Here is how you can calculate the VWAP, but I don’t really¬†think that you’ll ever need this. I think that you just need to remember that¬†VWAP represents the real average of all market participants, and this makes it¬†way more valuable than standard moving average indicators.

 Now, why does VWAP work? Three facts. Fact number one: 80% of trading orders come from large trading institutions. Fact number two: These trading institutions primarily use automated systems or algorithms to execute their trades. Fact number three: Those automated systems very often rely on VWAP. Let me show you something.

It’s proof of what I’m saying. These two snippets are from a hearing before the Committee of Financial Services. They are taken from a speech by Kenneth Griffin, CEO of Citadel, which is one of the largest trading institutions. He was speaking about their trading practices, right? So let’s see what he had to say during this hearing. He’s saying that it has been reported that
approximately 20% of market volume is now attributable to retail customers. See this? That’s what I was saying. 80% is institutions, 20% is retail. Now, another important thing here, in the second snippet, virtually all trades executed by institutional investors are in the form of program trades, such as Volume Weighted Average Price, that’s VWAP. So what he is saying is that most of the trades are institutional trades and that those huge institutions use automated systems such as VWAP.

¬†And that’s why we should use VWAP.¬†That’s why it is so important, and that’s why it works, because the biggest¬†players in the industry are using it for their trades, and that’s a fact. Now,¬†in the next part, I’ll explain my VWAP trading strategies. You can use these¬†with any trading instrument. My favorites are major Forex pairs like the¬†EUR/USD, AUD/USD, or the GBP/USD, and¬†indices my favorite is the S&P 500, but you can use it for any trading¬†instrument you like. Also, we can use the strategies for any timeframe. My¬†favorite for intraday trading is the 30-minute timeframe, and for swing trading¬†or long-term position trading, it’s the daily timeframe. But if, for example,¬†you are a scalper or an intraday trader trading with a one-minute or¬†five-minute timeframe, that’s completely fine. VWAP is universal, so you can use¬†it on any timeframe and any trading instrument.

Now, VWAP represents the trading position of an average trader, and many market participants use it as a¬†reference point for their trade entries. Now imagine you want to enter a short¬†trade on this chart here. The price is dropping; you want to enter a short¬†trade. So where is the best place to enter the short position? It’s not wise to¬†enter randomly or at the current daily low, but the logical entry point is¬†where the average market participant sold. You want to sell for a fair value,¬†not at the daily low, but at fair value, which is represented by VWAP. In this¬†chart, that’s the blue line, right? So when the price makes a pullback to VWAP,¬†this is where you want to sell because this is the fair price. Now, if an¬†institutional algorithm is trading, then the goal for the day could be, for¬†example, to sell X amount of lots on EUR/USD at VWAP or better. In this case,¬†better means here, right? That’s how it could look for an institutional¬†algorithm, sell at VWAP or better. So in this picture, you see the price¬†dropping below the VWAP, then making a pullback to it, and sellers selling for¬†the fair price, for the average price here, and then that triggers the¬†sell-off, right? So the general strategy for a short trade is to wait until the¬†price is below VWAP, wait for the pullback to VWAP, and short from there.

That’s the general strategy for a short trade. Now for a long trade scenario, it’s the same, only reversed. If the price is above VWAP, like, for example, here, that means buyers are in control, and it comes back to the VWAP line, then you want to enter long from VWAP. That’s the most basic way to trade with VWAP. Personally, I like to see a bit more before making a trade. I want to see some confirmation or a combo of multiple strategies. We will cover that later. Let’s just focus here on this example. This is a simple example. We have a VWAP starting here at the start of the day, so the VWAP shows the average market participant since the start of the day. This is the daily VWAP, right? Now, the big question is, where do we anchor the VWAP? Because everything depends on that. Where do we anchor the VWAP? You want to anchor the VWAP at crucial points in the market. Those are points where market participants made crucial decisions, where market sentiment shifted, and where the rules of the game changed.

So the most important places where¬†you want to anchor the VWAP are the crucial points. I listed my most favorite¬†ones, so I recommend anchoring VWAP to the beginning of the day, beginning of¬†the week, beginning of the year. Another important place where you can anchor¬†the VWAP is at an important swing point, then an important heavy volume zone.There’s more, but today we’re going to focus on those.

Alright, so let’s start with anchoring VWAP to dates, which is anchoring VWAP to the start of the day, start¬†of the week, start of the month, and start of the year. Anchoring to the start¬†of the day is, I would say, the most common use of VWAP. So we will start with¬†that. As I was saying, it is important to note the daily VWAP because it tells¬†us and shows us the average position since the start of the day, alright?¬†What’s the fair price since the start of the day, or a week, or a month, or a¬†year? So let’s check out a couple of examples here. What you see before you¬†here is the AUD/USD five-minute chart, and this is the¬†start of the day, so the VWAP is anchored to this place. What you see here is¬†the price is moving above the VWAP, which means buyers are in control, and you¬†want to trade from VWAP. So you want to trade the pullbacks. The first pullback¬†is here, a long from there. Another one is here. Then there’s a pullback here,¬†and then another long is from this place. But what happens here is that sellers¬†take control. Let me draw a line here. Up until this point, you should be¬†long-biased. The reason is that the price is moving above VWAP and buyers are¬†in control, so you want to take longs from the VWAP line. But when the price¬†drops below VWAP, that means that the average trader since the start of the day¬†is starting to lose money. So what do they want to do, those guys who are¬†losing money? They want to quit their longs. Where do they want to quit them?¬†At a fair price, which is represented by VWAP. So that means that those guys,¬†to get rid of their long positions, need to sell. So they sell, and this is¬†what they trigger. So when the price drops below the VWAP, you should no longer¬†look for longs, but you should be short-biased. But only for a short time here,¬†because then everything changes back, and it should take long from here.

After that, there is the end of the day, volatility has died out. Generally speaking, you don’t want to trade using VWAP when the price is doing this, when there’s slow volatility, not much is happening, low liquidity, and it is the end of the day. You don’t want to use VWAP there because VWAP works best when markets are volatile and when markets are trending, not in a situation like this. Alright, now let’s go to the next example. This is S&P 500, five-minute chart. Again, we have VWAP anchored to the start of the day, and you trade pullbacks. So first pullback, long from there. Another pullback, long from there. You always want to see the price move above the VWAP before the pullback, like I mean whole candles above the VWAP. So another pullback is in here. This is sort of a long zone with multiple long trade entries, and this is the last one. This is a simple scenario because the whole time we are long-biased because all the time the price is moving above the VWAP. This is, I would say, sort of the best scenario. Usually, it’s not like that. Now here is another example. This is a weekly VWAP, which means it’s anchored at the start of the week, which is in here. You are looking at a Gold Futures chart; it is a 30-minute timeframe, and you want to trade pullbacks to VWAP. The strategy is always the same, you trade pullbacks to VWAP. The first pullback is in here, then another touch is in here, another one is in here. All the time sellers are in control, the market is trending, which is great. VWAP works great in a trending market like this. In here, there is short again. This one is a losing trade, and then you need to shift the bias from short to long. In this case, it’s already no use here because this is the end of the week, and I definitely recommend closing all trades before the end of the week. Because imagine you are short from here, you are still in the short in here, and if you don’t quit the position before the end of the week, boom, gap. You don’t want to be caught in that, right? So that’s why I want to quit the trade before the end of the week.

Right, now here’s another example. This is again the weekly VWAP, which means that it’s anchored to the start of the week. That’s in here. So this is EUR/USD, 30-minute chart, and the way to go about trading this is longs from here. By the way, this is a missed trade. Unfortunately, the price didn’t reach the VWAP. Then a long from here. If you look closely, there actually was a reaction, but there was strong macro news on the US Dollar exactly at that time, and you don’t want to trade during strong macro news, at least not intraday trades, right? So this would be no trade from here. But an important thing happened here. Up until this point, we were long-biased, but the price dropped below the VWAP. Sellers pushed through, that means that sellers are in control, and that means you should be short-biased, which means look for shorts. Unfortunately, here the price missed the VWAP, so no short from here. No short from here either, unfortunately, but this is a nice pullback. So short from there.

¬†Now, this is VWAP anchored to the¬†start of the year. You’re looking at Exxon Mobil Corporation chart. It is a¬†daily chart. I use the daily chart with the yearly VWAP. So this is the start¬†of the year. In this example, it is pretty straightforward because, as you can¬†see, all the time buyers are in control and you don’t need to shift your bias,¬†which means you just take longs from the VWAP line. As you can see, the price¬†is reacting to that very nicely. It’s not always this case, obviously. This is¬†a very nice example that I picked, but I wanted to show you the ideal scenario.¬†Like, if the price is moving like this, it’s trending and making those¬†pullbacks, that’s sort of a, I would say, healthy trend. Then this is exactly¬†the scenario where VWAP works best and where you will have multiple very nice¬†trade entries. That’s where you want to use VWAP. Alright.

Now let’s cover anchoring VWAP to¬†important swing points. A swing point is a place where market sentiment¬†changed. Now, I don’t have an exact definition of a swing point, but if you¬†look at any chart, it’s usually pretty simple to spot. It’s usually the most¬†prominent place on the chart. So if the chart, for example, looks like this,¬†then this is the place that you want to anchor the VWAP to. That’s the swing¬†point, right? And if you anchor VWAP here to the candle which created the swing¬†high or swing low, if you anchor the VWAP there, it will show you the average¬†position since this important place. And this is a really important place¬†because all traders who are trading that trading instrument see this important¬†swing point and they base their trading decisions around it. You’ll see it very¬†nicely on those examples.

Now, if you look at this chart, this is, by the way, an Apple daily chart. If you look here, then what’s the most prominent place here? The most prominent swing point is this one, right? Everybody looking at this chart sees that, so you want to anchor the VWAP to this candle which created that swing high, and VWAP shows the average trader since that point. So you want to trade pullbacks to that, alright? Now, the first pullback is here, but at this point, you don’t really know that this is going to be a strong swing high, right? You don’t, so no trade from here. But the second pullback is in here, and that actually is a valid trade entry point, and you can enter the short from there. Another short zone is here, here, and here, then another here. This would be a losing trade, but look here. Earnings caused this gap, and after earnings, the price was moving above the VWAP, which means that again, you need to switch from short bias to long bias, which means long from here.

¬†Alright, now here’s another¬†example. This is the Australian Dollar-US Dollar daily chart. This is a very¬†strong swing point here, and if you anchor the VWAP to this candle, to this¬†bullish candle that formed the low‚ÄĒdid I say bullish? I meant bearish‚ÄĒto this¬†red candle that formed the low, then the VWAP will show you the average trader¬†since this point, the average position. So pullback to this place, a long from¬†there. Again, the price hits this fair price, and long from there. As you can¬†see, it’s always the same. It’s only about where you anchor the VWAP. In this¬†case, this is EUR/USD 30-minute chart. Again, if you look at the chart, what’s¬†the most prominent place every trader sees here? It is this, right? This strong¬†swing point where an uptrend turned into a downtrend. So you anchor the VWAP to¬†this candle which created the high of this swing point, and pullbacks from¬†there. First pullback, second, third, here’s the last one. Alright, as you can¬†see, the price really respects those places as the traders like to react to¬†that fair price.

¬†Now, here is the S&P 500¬†30-minute timeframe. Again, if you look at the chart, what’s the most prominent¬†place here? This. This is it. Sentiment changed here, the game changed here,¬†and all traders know that, so they base their trading decisions around this. So¬†that’s why the price likes to react to VWAP. This reaction, and then this¬†reaction. Now, here is the last example. Again, it’s very similar. This is¬†EUR/USD 30-minute chart. Again, we have a very strong swing high. VWAP is¬†anchored here. On this example, there’s actually only one trade entry, which is¬†here. Alright, and here in this place, the price missed the VWAP. So I hope¬†that was clear, and let’s now cover anchoring VWAP to significant heavy volume¬†zones. This is where you can combine VWAP with a volume profile, which is pretty¬†cool, I think. So, a heavy volume zone shows us the big guys, the big trading¬†institutions. We identify those heavy volume zones with a volume profile. This¬†is how it can look like. It has many shapes depending on the volume¬†distribution. This is just one of the shapes it can take. The wider the volume¬†profile is, the heavier volume is traded at that price level.

Now, how to go about this? If you look at the picture, it shows a rotation in here where heavy volumes were traded. And usually, it is like this. When you have a rotation, usually heavy volumes are traded in a rotation. The reason is that the big guys, the trading institutions, they have insane amounts of capital, and they need to allocate that slowly and unnoticed in the market, right? So they do it in rotations. That’s why in rotation, there are typically heavy volumes. So the first thing you want to see is a rotation where heavy volumes are traded. From there, you want to see trend activity, like here. When you see this, what you do is you anchor VWAP to that candle, which is at the end of the heavy volume rotation and at the start of that trend. And then, as usual, you trade pullbacks like long from here. Now I know what you’re thinking. You’re thinking, what if I anchor the VWAP here or what if I anchor the VWAP here? Would it all be wrong? Now, in most cases, it won’t.

 

It doesn’t really matter which, in this example, from those candles you choose to anchor the VWAP. The VWAP will look more or less the same regardless of which candle you choose. So there is no exact rule, and you won’t make a mistake if you choose, let’s say, in this example, any of those three. But you should target the last candle of the rotation and the first candle of that new trend. Now let me show you a couple of examples that will make it clearer. This is EUR/USD 30-minute chart. In here, there is a rotation, and in that rotation, there’s a heavy volume zone. From that strong trend activity started. So what you do is you anchor the VWAP to the last candle of that rotation and the start of the trend. That’s this huge red candle. So you anchor the VWAP there, and from there, it’s as usual, pullbacks to VWAP. So short from here, short from here. That was only a small reaction and then rotation, so you don’t really want to trade in that rotation, but if you do, you would probably end up with a loser here. But then you need to shift your bias because of this, because the price is moving above the VWAP. So from shorts, you want to trade longs, longs from VWAP. Right.

 

Now here’s another example. This is EUR/USD 30-minute chart. Again, we have a rotation where heavy volumes were traded, and from that rotation, we have a trend. So you anchor the VWAP at the start of a trend. That’s this candle, and trade pullbacks. So this is the first pullback, this is the second pullback, this is the third pullback. In this case, it looks like the price went below VWAP and didn’t really respect it, but if you look here, it was not even 10 pips, so nothing too terrible. I would still count this as a viable reaction to the VWAP. Now, here is the last example of this. It is on Tesla, and it is a daily chart. In here, you can see a rotation followed by a trend. In the rotation, you have heavy volumes, and you anchor the VWAP here to this candle, which is the start of this trend and the end of the rotation. This is the first pullback, but you don’t trade from there because at this point, you don’t really know that the rotation is over and that a new trend is starting. So no trade from here, but right here, there’s a nice opportunity for a short. Now I want you to notice one thing here. Let’s take a look at this gray profile on the left. That’s a yearly profile that shows volume distribution over the whole year. Take a look at this heavy volume zone. Where is it? Right here. It aligns with our VWAP, and that massively adds strength to that short trade signal because it’s not only based on the VWAP, but also it is based on a very, very significant heavy volume zone from the yearly volume profile. Which brings us to the next topic, which is combos or confluences with other trading strategies.

 

Let me quickly check the chat here. Wow, I wonder if I’m going to be able to cover all those things you guys wrote here. Okay, let me just pick a couple of them here. This is a good one. When swing trading, can you keep your positions over the weekend, or should you also close them? I keep them over the weekend. Swing trading on daily charts, I do keep them over the weekend, and also I keep those trades open during macro news if the macro news isn’t extremely strong macro news, let’s say like FOMC or rate decision or maybe some important elections. But yeah, I do hold those because otherwise you would be just, you know, jumping in and out all the time from those swings. So yeah, that’s how I go about this. And I ran a couple of tests on the results if it’s better to close the positions over the weekend or before strong macro news or not, and I didn’t really see any difference there. Now I’m talking about swing trades, right? So I didn’t really see any difference with swings, so I just keep those open. Yeah, this is like a Holy Grail, guys. This is not a Holy Grail. This is VWAP. It depends on you if it’s a Holy Grail or not. It depends on you. But it’s a very good tool. If you combine it with a volume profile, then it’s very strong. I’ll show you the combos. The combos are really the best thing, I think, from this presentation here. Where do you put take profit and stop loss? We’ll cover that. We’ll cover that later. Let me see if there’s anything else here I could answer.

 

Where do you get anchored VWAP? I’ll show you guys. I actually do have anchored VWAP. I’ll show you. The easiest way is TradingView, but I also have VWAP for TradingView, and it works
with the free version, which is cool. Alright, let’s continue, guys. Let’s continue with the presentation here, and then I’ll just, I’ll jump again to the questions. So now I’ll talk about the combos. Combos are where more independent setups point to one strong support or resistance zone, right? So, so far, we’ve covered some simple VWAP setups which are solely based on VWAP, and those tend to give good results. However, those are relatively simple, right? And they may not always produce consistent results. But if you want consistency and a better win rate, here you want to use those combos. I personally seek combos for all my trades. If I can find any kind of combo, I try my best to find combos for all my trades. I would say maybe 80 or 90% of all my trades are based on combos, right? Now, in here, we’ll cover combos of VWAP and price action and volume profile. So let me show you a couple of examples here. This is S&P 500, five-minute chart. This is daily VWAP here, anchored to the start of the day. This is when the rollover is, right? This is the start of the Asian session. I know that some of you guys asked in the chat, so that’s where the Asian session starts. That’s what I count as the start of the day. So here is where the price is moving way below the VWAP and makes a pullback to the VWAP, and normally, if you are trading just based on the VWAP strategy which I showed you, you would just go short from there without any other thoughts. But since we are talking about combos, let me show you a combo here. So notice how the price was reacting here in the past. This means that this zone in the past worked as a support until this point where the support got breached, and the support became a resistance. I really like this setup. You guys know it, right? This is an old price action setup. It’s not mine, but I really like to combine it with my other trading setups like this one, like the VWAP setup. So in this case, as you can see, the price action resistance is very close to that VWAP resistance which is in here. Not exactly to the point at this place, but very close. Resistances and supports are not exact places; they are zones. If those meet in this general area, if they are close, then I count it as a valid combo and I trade from there, because combos have a way better win rate. Alright, so this is the combo of a price action setup and VWAP.

Now, in here, we have a triple combo, actually. This is a combo of a price action setup, volume profile setup, and VWAP setup. So let’s start with the VWAP setup here. If you look at the volume profile, it shows heavy volumes here in this rotation. This is where you anchor the VWAP, the start of the trend, and this is where the price gets very, very close to the VWAP. Now, let’s take a look here. You see this important swing high, this pin bar. This shows that in the past, this worked as a strong resistance, right? Because the price was reacting very sharply to this place, very strongly. Here, the resistance got breached, and it became a support, very close to the VWAP. But that’s not all. Let me change the color of the marker here. If you look at the volume profile, there’s this volume bump. I like to trade from the beginnings of those volume bumps, like in here. By the way, those volumes were traded in this place, right? And this is where those volumes get tested for the first time. So we have a volume profile setup here, we have a price action setup here, we also have a VWAP setup here, all pointing to this place, and that’s the combo. That’s what is telling you, it’s shouting at you to go long from there. Alright.

Now, what I do is I trade from the first, let’s say, first barrier of that combo. In this case, it’s from here, right? Not from, let’s say, from the VWAP. I trade from the first barrier because I don’t want to miss the trade entry. So if I were trading based only on VWAP, I would miss the trade entry right here. I would miss it, so that’s why I trade from the first barrier.

Alright, next example. This is¬†Bitcoin. Long rotation. Oh, and it is a daily chart. It is an example back from¬†the old days when Bitcoin was under 20K, not so long ago. Anyways, we have a¬†rotation with heavy volumes here, followed by a strong trend. And if we start¬†with the VWAP, then it’s anchored to this candle. I counted this as the start¬†of the trend. It could as well be anchored to this¬†candle, but I anchored it here,¬†and this is where the price made a pullback to it, right? So this is the VWAP¬†setup. Now let’s talk about the volume profile here. I like to use the volume¬†profile over trend areas like this and look for significant volume clusters¬†within the trends, like this volume cluster. And as I was saying, I like to¬†trade from the beginnings of those heavy volume zones. See, it aligns very¬†nicely with VWAP. So we have a nice two-setup combo here. By the way, if you¬†look closely here, there is also this little reaction, which means there was a¬†resistance in the past. Let me try and draw a straight line here, and this¬†resistance turned into a support when the price breached that resistance. So¬†actually, this is another factor that adds strength to that level. That’s¬†exactly what you want to see. When the market gives you such a combo, then you¬†just trade it. No need for any sort of confirmation, just jump in and go long.

Now here is the last example of¬†the combos. This is Proctor and Gamble Company, five-minute chart. In here, I¬†have two VWAPs. One is anchored to this swing low right here, this is where¬†it’s anchored. The second VWAP is anchored after the gap, after this gap. By¬†the way, this is also another way where you can anchor the VWAP, especially if¬†you trade stocks after gaps, because for stock traders, gaps are really¬†important places. So we have those two anchored VWAPs, and if you see, if you¬†look here, they sort of make like a support zone. Also, let’s take a look at¬†this volume profile here, specifically into this zone, which points‚ÄĒlet me¬†change the color here‚ÄĒit points to the same place as those two anchored VWAPs.¬†So all those are giving you the signal to go long from there. Alright, so this¬†is how you can use the combos that are really powerful. If for some reason you¬†guys don’t want to look for those combos and if you just want to focus on VWAP¬†setups alone, then I recommend not trading each of those blindly. I mean, not¬†trading each hit of VWAP blindly. I recommend waiting for confirmation. So in¬†this example, this is a long trade scenario where the price is above the VWAP,¬†drops to the VWAP line, which acts as a support. But you don’t enter long at¬†first touch. I don’t recommend that. If it’s not a combo, I recommend waiting¬†for confirmation. Confirmation is when a bullish candle, this one, closes above¬†VWAP. This is where it closes above VWAP. This is the place from which you go¬†long. The reason why you wait for this candle to close is that it gives you the¬†signal that buyers are jumping in, that the market is going to react to that¬†VWAP, right? So if you don’t use combos, then at least work with those¬†confirmations. It doesn’t need to be this exact confirmation. If you’re an¬†advanced trader, if you use, for example, order flow, then yeah, that’s, I¬†think, the best confirmation you can get. If you are a price action trader,¬†then I recommend something like this.

¬†Now, here is a short trade¬†confirmation. We have a VWAP anchored to this heavy volume zone here, but¬†that’s not too important here. This is the pullback. Normally, you would go¬†short from there, but you want to see a confirmation, right? This candle closes¬†below the VWAP, and that’s the confirmation. So this is the place you go short¬†from, right? The bearish candle closes below a resistance.¬†Now, finally, take profit, and¬†after that, we’ll cover stop loss. Let me see the questions you guys had.¬†Yeah, NinjaTrader as well. You¬†can have anchored VWAP in NinjaTrader as well. I also have anchored VWAP in¬†MetaTrader.

¬†How do you anchor VWAP to the¬†chart? You just, well, it depends on the platform, but usually, it’s super¬†simple. You just select the indicator, and you click on the chart. Super easy.¬†Yeah, the pictures which you saw were from TradingView. I think up until this¬†point, the next one, the next couple of pictures will be from NinjaTrader, and¬†those will be with my custom anchored VWAP.

How to set the VWAP parameters?¬†Usually, I wouldn’t really mess with that. There’s not really too much you want¬†to set there in the settings. Just make sure you have the calculation should be¬†using open-high-low-close (OHLC) / 4, right? Sometimes they do it like OHLC /¬†3. I believe in TradingView they have it like that. That’s, in my opinion, not¬†the correct way how to use that. I don’t know why they have it like this, it’s¬†stupid. I think TradingView is like a big part just coders and not traders, at¬†least the guys who do the platform, because some of the indicators, wow, don’t¬†get me started on that.

Alright, let’s talk about take¬†profit. Let’s talk about take profit, and then we’ll talk about stop loss¬†placement. There is one main rule to follow here: take profit goes before a¬†barrier. We all talk about barriers based on volumes, price action, and VWAP.¬†Now, here are a couple of examples. This is EUR/USD 30-minute chart, and this¬†is NinjaTrader 8, by the way, with my custom indicator. So this is my volume¬†profile indicator. This blue line, that’s my anchored VWAP indicator. So in¬†this example, we have a very strong swing low in here, so the VWAP is anchored¬†to this place. Here is a pullback, so it is long from here. And if you’re long¬†from here and thinking about where to quit the trade, in this example, it is¬†pretty straightforward because we have a massive heavy volume zone here which¬†could potentially work as a resistance. The price usually has problems going¬†through heavy volume zones, so that’s why you want to take profit here before¬†the price reaches this resistance. So actually, in this example, it would be¬†best to just quit a little bit before that, just to make sure, right? As you can¬†see, the price did really react first in here, then this massive sell-off in¬†here. Alright, so it would be a huge risk to try and go past this. I wouldn’t¬†really recommend this, alright? So that’s why I’m saying take the profit before¬†the barrier. Don’t risk a fight if you don’t have to.

Now, in this example, we have a strong swing low, so the VWAP is anchored to that. There is a pullback to that VWAP, so long from there. And in this example, a good place to take the profit would be based on those heavy volumes here. This place is important because there was a very strong rejection of higher prices or swing high, if you will. And within that place, there was this heavy volume zone that shows sellers, sellers jumping in, finally winning over the aggressive buyers here and pushing the price downwards. So this is an important place for sellers. Those sellers could become active again, and you don’t want to risk that because potentially, this could be a turning point. Boom, didn’t happen. That was at the end of the day. Volatility died out. I don’t know about you guys, but I hate being stuck in rotations like these. So best to take the profit here before the price reaches this resistance. By the way, I remember this chart because after this rotation, there really was a sell-off. It’s not here, but not on this picture,
but it was there after that, a couple of hours after, I think. So in the end, there really was that reaction.

Alright, on to the next example.¬†Here we have a strong swing high, so the VWAP is anchored there. This is a¬†pullback to that VWAP, so it is short from this place. Boom, boom, boom. This¬†is the reaction, and if you are in this beautiful short and looking for a good¬†place to take the profit, then you should definitely look into this area where¬†the price was before, and you want to look for significant heavy volume zones¬†like this one. This one is screaming at me because this was a strong rejection¬†of lower prices where massive volumes were traded. This screams at me that I¬†should take the profit here because the price could react to that and go¬†upwards. In this case, it didn’t happen instantly, but in the end, maybe the¬†market just went for that liquidity below this and then just went upward. But¬†this would be the place to take the profit just to be sure you don’t lose all¬†you gained in here.

¬†Alright, here’s another example.¬†There is a little rotation where heavy volumes were traded. From there, there¬†is a strong trend, so you anchor the VWAP here and trade pullbacks. The first¬†pullback is in here, so it is a nice little short from this place, and the¬†price is going towards this heavy volume zone, and you don’t want to trade¬†against that, so you take the profit here. One more thing to give you a warning¬†here is this little high. This one is not too strong, but it shows a place¬†where the price reacted, which means it was a resistance which turned into a¬†support when the price blew past that resistance. So it turned into new support¬†right here. So another thing that adds strength to that support based on those¬†volumes, and as you can see, the price really did make a reaction there.¬†Alright, so that’s the ideal take profit here, before the price hits this heavy¬†volume zone, ideally a couple of pips before just to make sure.

Now, here’s the last example of¬†this. Again, we have a strong swing high. The VWAP is anchored to that candle¬†which formed the high of that swing point. Here is the pullback, which¬†means short from there. And in¬†this case, the barrier where you want to take the profit is based on VWAP. This¬†VWAP is anchored to this significant swing low. That’s this candle. That’s the¬†candle that formed the low, and here is where the price hits the VWAP from this¬†short, and there is a risk that the price will turn because this is a strong¬†low, and the VWAP represents the fair price since that low, and there could be¬†a reaction. At first, there wasn’t. After some time, there was. But the safest¬†place is to quit a couple of pips before the VWAP, right here. Alright.

¬†Now let’s talk about stop loss.¬†Again, there’s one rule: stop loss goes behind a barrier. So take profit is¬†before a barrier, stop loss is behind a barrier because the barrier should¬†protect your trade. That’s why stop loss is behind it. If the barrier fails,¬†then you take the stop loss. Then you stop hoping and take the stop loss,¬†right? The barrier is very often, at least in my case, a swing point or a heavy¬†volume zone. If there is no barrier in the close area where you want to place¬†the stop loss, then you can use a fixed stop loss, which is, for example, 15 or¬†20 pips, depending on the trading instrument, depending on the volatility,¬†right? But only if you can’t find any barrier. Let me show you a couple of¬†examples. So this is EUR/USD, a 30-minute chart. There is a swing low here,¬†pull back to it, so long from here. And the ideal place for stop loss is the¬†closest swing point, in this case, it is here. I mean the closest swing point¬†closest to the trade entry. So if you enter here, then the closest swing point¬†is this one. Behind that, you place the stop loss. Actually, I do place it¬†exactly at that low. Not a pip below it, not two pips below it, no, exactly¬†there.

Alright, here is the next¬†example. Here is a swing low, VWAP is anchored to that candle of the swing low.¬†Here is the pullback, which means long from there. And if you go long from¬†there, you should place the stop loss below the nearest swing point. Now, if¬†you look closely, it is this one right here, but that would be just insanely¬†close to the long trade entry, and you need to let your trades breathe a bit,¬†right? They need some room. So I wouldn’t place the stop loss here in this¬†case. In this specific case, I would choose the second nearest swing point,¬†which is this one. Alright, so the stop loss would go here.

Now, in this case, there are¬†actually two ways how we can place the stop loss. So here is the VWAP, the blue¬†line. It’s anchored to this swing point. This is the first pullback, we’ll talk¬†about this later. This is the second pullback, so short from there. By the way,¬†take profit at the heavy volume zone, before the heavy volume zone. And stop¬†loss, if it is above the closest swing point, it is here, but it’s very, very¬†far, like this distance. That’s very far. So in this case, you want to place¬†the stop loss based on the volatility, let’s say, or the ATR indicator, which¬†shows the average true range, the average volatility, and could be, for¬†example, 15 or 20 pips, right? Let’s make it simple, just use a fixed stop loss¬†if the closest barrier is too far. So the fixed one could be, for example, here¬†or here. Alright.

Now, yeah, this is that trade I¬†wanted to show you here. VWAP is anchored to this swing point. There’s that¬†pullback to it, so short from there. If you remember, we were already talking¬†about this example because this was the heavy volume zone for the take profit,¬†right? And let me delete that. The closest swing point is this one, so that’s¬†where you place the stop loss. By the way, remember when I was saying that¬†heavy volumes are very often in rotations? Now here is a rotation, so it’s very¬†likely that heavy volumes are here making a barrier, and the stop loss should¬†be behind the barrier. So in this case, it is behind this barrier, behind this¬†heavy volume barrier, and at the same time, above this swing point, which is¬†great. It’s like the ideal place for a stop loss.

Now, in this example, this is the¬†last one, this is EUR/USD 30-minute chart. And we have VWAP anchored to this¬†swing high. The first pullback is in here, short from this place. By the way,¬†we already had this example if you remember when we were talking about the take¬†profit. Here we’ll talk about the stop loss, which is above the closest swing¬†point. That’s this one. And again, if you notice this rotation, and I bet if I¬†used the volume profile here, unfortunately, on this screenshot, I didn’t have¬†the volume profile here, but if there was a volume profile, I bet there would¬†be massive volumes here in this rotation. So heavy volume barrier, above that¬†there is that swing point. So again, this is an ideal place to place the stop¬†loss. I like places like this, behind a heavy volume zone and above a swing¬†point.

Now, since VWAP works best in trending markets, it’s a good idea to trail trades. This is quite a big topic. I covered that in my VWAP course, but in here, I’ll show you at least this one example of how you can go about this in a trending market. So in this example, we have VWAP anchored here to this swing low, and there is a pullback to it, so it is long from here. The first stop loss is in here, and as the price goes higher and higher, you want to tighten the stop loss. You want to trail it, so you move it below the swing point in here. The price goes higher and higher and higher again, you move the stop loss below the swing point in here. And you continue doing that, again below the swing point, until the price reaches a strong barrier, you take profit there, or the price does this and hits your stop loss. Alright, so this is the general way how you go about trading those trades. This is how you can get the most out of the trade when the market is trending.

Now, here is a little advice on¬†position sizing. Some traders, they like to change the amount they risk based¬†on how confident they feel about the trade. So if they are really sure about¬†that trade, they might risk more, and if they are not too sure, they might risk¬†less. Now, I’m not a fan of this approach for two reasons. The first reason is¬†that feelings are hard to measure, so it’s not a reliable method. The second¬†reason is that in my experience, even the trades that don’t look perfect can be¬†just as successful as the ones that do seem perfect at first place, right? So¬†that’s why I prefer to stick to a solid plan and use the same position size for¬†all my trades. So I recommend risking, for example, 2% of account balance per¬†trade and keep it at that. Don’t change it based on how you feel, right? So¬†don’t adjust the risk per trade based on how you feel about a trade.

Now, since calculating how much to risk for each separate trade can be a hassle, especially when take profit and stop loss are a different number of pips in every trade, I recommend using my¬†Trade Manager software. It has a lot of useful features. I listed them here: calculating position size, adjusting take profit and stop loss with just one click, simplified limit orders also with just one click, protecting your trade, that means moving stop loss, partial position closure with just one click, and this very, very unique feature, securing limit orders before macro news. I don’t really think any other software around the internet actually has that feature, so I think it’s pretty unique. You can download the Trade Manager for free on this address. It is a lifetime license. You can use it on any computer you want, on any number of computers you want, no strings attached. You just get it, use it, and if you guys like it, then tell your friends about it.

Alright, so we are getting near¬†to the end of the webinar, and since you guys stayed here until the end and¬†proved that you really want to bring your trading to the next level, I’ll make¬†you this very special offer on the new VWAP pack, which I just released today.¬†Here is what it includes. It includes a new VWAP video course designed for¬†those who want to specialize in VWAP trading. It has 31 VWAP videos spread¬†around 9 hours of playtime. The VWAP pack also includes my custom-made VWAP and¬†anchored VWAP indicators. They are for TradingView, even for the free version¬†of TradingView, so you don’t really need to pay anything to TradingView. They¬†work with TradingView, NinjaTrader, MetaTrader 4, MetaTrader 5, all those super¬†easy to use. So you’ll get that in the VWAP pack, and as well, you’re going to¬†get the Volume Profile Pack, which is a set of my custom-made volume profile¬†indicators, again for various trading platforms. The reason I’m including the¬†Volume Profile software in this VWAP pack is because the Volume Profile works¬†very nicely with the VWAP and anchored VWAP. You saw that in the combos, and in¬†the video course, I’ll show you exactly how to go about this, how you can¬†combine those to get very, very good results. Alright, so that’s included in¬†the VWAP pack as well. And on top of that, there’s the tech support, which¬†means that this¬†guy will connect to your¬†computer, install everything, including the platform indicators. He’ll connect¬†you to data, he will help you with loading up my workspaces, and he’ll¬†basically help you with everything that you need help with, so you hit the¬†ground running. Alright, so that’s the whole pack. It includes all you need to¬†trade profitably with VWAP. And since I really wanted to offer you something¬†special, you can now get the whole pack for only $397, which is, if you do the¬†math, over 50% discount. You can get it on my website,¬†Trader-Dale.com, and you can¬†get this in the next eight days, which means until the 21st of June.

Now, if you are not sure and if¬†you would like to read some reviews on my service, you can visit¬†TrustPilot¬†or¬†Forex Peace Army¬†website. Just go there, search for Trader Dale, and on those¬†sites, there are hundreds of unbiased reviews and ratings from our members. So¬†check them out, see what they have to say. I’m really proud and happy that my¬†service has the highest five-star rating on both sites.

Now, let me check the chat to see¬†if there are any questions which I haven’t answered. And if you guys think of¬†any questions later or if I skip your questions here because there are so many¬†here on the chat, then this is my email address. Send your questions there.¬†I’ll answer all of them, and I’ll be happy to help you with anything you need¬†help with. Alright, and if you guys prefer a chat, there’s also chat on my¬†website. So let me quickly check the chat.

Okay, will there be a replay? Yes, this is going to be recorded. It’s going to be on YouTube, and I’m going to send you a link.¬†Does the Trade Manager work on futures? It works with¬†MetaTrader 4, so whatever trading instrument you have in MetaTrader 4, it will¬†work with, right?¬†Does it work on NinjaTrader too? Yeah, my custom-made¬†indicators are made on NinjaTrader as well. Actually, that’s my preferred¬†platform. I do most of my analysis on NinjaTrader with that VWAP indicator.

Alright, guys, so it seems like I covered most of the¬†questions. Again, if you have more of them, just send me an email. I’ll be¬†happy to answer it. Alright, so let’s wrap it up. Thanks for coming, and I’ll¬†be looking forward to seeing you next time in some next webinar, some next¬†video, or in our members area. So until then, happy trading!¬†I hope this helps! Let me know if there’s anything else you¬†need.

 

 

3 thoughts on “ūüĒīWEBINAR: How to Trade with VWAP in 2024”

  1. How do we account for volumes from other brokers? I assume that 80% which are big players don’t use retail brokers.

  2. To get the most accurate analysis you would use futures. That said, if you were to compare you’ll see spot fx brokers are extremely close and thus it doesn’t make a great deal of difference.

    1. Your comment is “Spot-on”. I am trading stock indices via a CFD-broker and also via NinjaTrader, which is Futures trading. I have never noticed any big difference between the shown volumes on those two trading platforms

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