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jperl

Trading with Market Statistics III. Basics of VWAP Trading

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NEWBIE is now ready to take trading a little more seriously. After a minor disaster trading with the trend and getting stopped out, he's decided to look at the "Trading with Market Statistics" Threads and has read [thread=1962]Part I[/thread] and [thread=1990]Part II[/thread] at least a half a dozen times. He doesn't know much about statistics but he is willing to learn if it will help him with his trading.

 

What he has learned so far or at least should have learned is that market direction is reflected in the relation of price to the VWAP AND the relation of the VWAP to the PVP. Market data is skewed to the upside when the VWAP is above the PVP, skewed to the downside when VWAP is less than the PVP and symmetric when VWAP ~= PVP.

 

NEWBIE should be trading only in the high volume region of the price action

so for NEWBIE to enter a trade, the following conditions should prevail:

 

Long Entry:

 

VWAP > PVP and price action above the VWAP

 

Short Entry:

 

VWAP< PVP and price action below VWAP

 

No Trade:

 

VWAP~= PVP

 

NEWBIE is going to embed this in his brain so that it becomes second nature.

 

Download the following video and see how NEWBIE fairs by following market statistics.

 

 

ER2VWAPTrade

 

 

In the next thread, [thread=2101]part IV,[/thread] our newbie will learn about other points where he can trade

 

There was a video posted here that doesn't seem to be working. When I click this, it goes to a game site. This is the second video posted where the NEWBIE trader began to use VWAP. Did this ever get posted onto this forum? I'd like to see how NEWBIE began to trade differently.

 

Thanks also for posting all of this unique information. I don't think I have ever seen anything quite like this.

 

STFS

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If you follow through to filefront and download the .swf file it seems t be the correct one.

 

Perhaps a mod could grab it and embed it into the thread rather than having it offsite?

 

Thanks Blowfish, I've fixed the post and attached the file directly in the post.

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Hey all, just have to say AWESOME thread!! I believe this is definetly a great edge to add to your trading arsenal. Quick question for all those mt4 users...I am experiencing considerable lag when using the market statistics mq4 indicator, does anyone else find this or have any solutions? Is it the indicator or most likely a computer issue on my end?

 

Dryfter

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Hey all, just have to say AWESOME thread!! I believe this is definetly a great edge to add to your trading arsenal. Quick question for all those mt4 users...I am experiencing considerable lag when using the market statistics mq4 indicator, does anyone else find this or have any solutions? Is it the indicator or most likely a computer issue on my end?

 

Dryfter

 

Hi,

 

Its difficult to say, without knowing your indicator (source code)

your PC, and how many charts you have open etc...

 

Anyway, the calculations need some resources (CPU and memory).

 

Regards,

 

Hal

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Hey all, just have to say AWESOME thread!! I believe this is definetly a great edge to add to your trading arsenal. Quick question for all those mt4 users...I am experiencing considerable lag when using the market statistics mq4 indicator, does anyone else find this or have any solutions? Is it the indicator or most likely a computer issue on my end?

 

Dryfter

 

All implementations are pretty highly iterative though I managed (with some help from a mathematician) to come up with a continuous algorithm.

 

as an aside as MT4 'brokers' don;t usually have complete volume info it is not an ideal platform anyway.

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Hey all, just have to say AWESOME thread!! I believe this is definetly a great edge to add to your trading arsenal. Quick question for all those mt4 users...I am experiencing considerable lag when using the market statistics mq4 indicator, does anyone else find this or have any solutions? Is it the indicator or most likely a computer issue on my end?

 

Dryfter

 

Hi dryfterwylde,

 

If you are using market_statistics_v1 it can be an issue but I made a lot of improvements and it is at v4_1 now.[hopefully last version:doh:] I advise you to update your indicator.And sorry but thats the best that i can do[you shouldnt blame these are my first indicators].And yes it is iterative. Blowfish I would like to hear your non-iterative version if it is not a secret.

 

Akif,

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HI Aki,

 

It al started here Algorithms for calculating variance - Wikipedia, the free encyclopedia seacthing round the internet revealed a couple of online methods. I'd really like to do the skew in a non iterative fashion but my maths is nowhere near strong enough! I have a couple of 'issues' with PVP as a proxy to determine skew that I have mentioned in the threads.

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HI Aki,

 

It al started here Algorithms for calculating variance - Wikipedia, the free encyclopedia seacthing round the internet revealed a couple of online methods. I'd really like to do the skew in a non iterative fashion but my maths is nowhere near strong enough! I have a couple of 'issues' with PVP as a proxy to determine skew that I have mentioned in the threads.

 

yeah in my experience (for forex) PVP acts as HUP really nice but thats all. Determining the skew looking at PVP and VWAP difference play in that direction looks kinda fuzzy for me. Maybe I didnt get the concepts good enough. SD bands really work well, the price likes to move between those bands but in which way it is gonna move is still a big question and VWAP-PVP difference doesnt help me a lot.

 

Akif,

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Well there is a whole other issue with forex and that is whether using bid and ask chanes as a proxy is good enough for PVP, I don't think so. It can vary tremendously depending on how you allocate the volume to a level. Looking at every single print and allocating it to the apropriate level gives quite different results to averaging across a 2 min bar.

 

Actually it's debatable (that's being generous) whether FX data is 'OK' for VWAP and SD bands. If the lines it gives you are a useful framework who cares.

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I want to thank you all for sharing your knowledge on market profile. After reading the posts and watching all the videos on VWAP, I spent several weeks reading on market profile. It was an eye opening experience. I am in a transition phase from being an indicator-based trader to market profile trader.

 

My question is what is charting software used in the videos on VWAP trades? Do you recommend a particular vendor of market profile software? I am evaluating Investor R/T and Sierra Chart, the latter is bit cheaper. These questions might have been already asked so I apologize if they are repeat questions.

 

Clef

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Depends what you're looking for. If you're looking for the cheap as chips route, then there are the ones that you have mentioned. Personally I don't like the investor r/t package as i've found it buggy in the past. One thing that's worth noting is that there's normally a $50 a month fee to be paid for market profile, however, if you get the fin alg market profile for Ninja Trader then there's just a one off fee to buy it, which in the long run will save you $$$

 

If you're already an established trader, then just stump up for CQG.

 

 

On a side note, if you're new to market profile then in my experience, the most effective way to use market profile is to understand the market structures. By understanding this you will be able to see when the market is in value, short covering and long covering through P and b structures on the profile. By knowing this then you can then choose how you're going to approach the market to take advantage of the market structure.

 

I'll make a post on my blog about market profile for those who are interested

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Thank you, 86834.

 

For developing a better understanding I kind of liked Investor R/T for the reason that you can replay the session and see P and b developing.

 

Being new to market profile, I want to paper trade first until a consistency in profit is developed. But as you said, Investor R/T costs about $75 per month. I will certainly look at Final algo.

 

Clef

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Clef it is probably worth mentioning that trading with market statistics requires a different set of tools to MP. Whilst there appear to be similarities there are key difference that are discussed at some length on a couple of occasions within the "Trading with Market Statistics" threads.

 

The two tools required for the techniques and observations presented here are PVP (volume 'POC" if you like) and the VWAP. There are a whole bunch of packages that offer these either natively or with user written studies.

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Thank you, BlowFish.

 

Do you recommend any particular set of studies on market profile? I know some traders trade with HVN/LVN, VWAP scalp trading mostly using auction market theory, whilst other traders have combined AMT with volume spread analysis. The trouble is that they all look promising.

 

Clef

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So you do want Market Profile rather than Market Statistics? Fin Alg is pretty decent and inexpensive as 86834 said.

 

If your are still looking for a 'style' I would recommend reading all these market stats threads carefully (or Jerrys posts at least). They are quite comprehensive. I am probably not well qualified to talk about MP but it seems to me most of the resource seem to be about theory and analysis rather than actual trading. Having said that VAH VAL seem to be widely watched levels I am pretty sure you could find/come up with something pretty robust trading at these levels.

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I visited at fin alg website. While it is true they charge $250 one time fee for license, they have a service called Market Balance that costs $59 per month. By reading through the description of market balance, this feature seems similar to market delta's foot print chart.

 

I will continue to read the threads on Trading with Market Profile.

 

Thank you for your insight.

 

Clef

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What he has learned so far or at least should have learned is that market direction is reflected in the relation of price to the VWAP AND the relation of the VWAP to the PVP. Market data is skewed to the upside when the VWAP is above the PVP, skewed to the downside when VWAP is less than the PVP and symmetric when VWAP ~= PVP.

 

NEWBIE should be trading only in the high volume region of the price action

so for NEWBIE to enter a trade, the following conditions should prevail:

 

Long Entry:

 

VWAP > PVP and price action above the VWAP

 

Short Entry:

 

VWAP< PVP and price action below VWAP

 

No Trade:

 

VWAP~= PVP

/QUOTE]

 

Sorry about this but

but peak volume price (PVP)

vwap

Point of Control (POC),

 

are different we should compare the formulas.

 

What are the difference in concept?

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Hope i've understood your question correctly...

 

PVP = The price with the most volume traded over a given period.

 

POC = The price with the most TPOs (time/price opportunties) over a given period. Tpos come from market profile or a meta profile style chart.

 

Knowing the TPO based POC or its computation are not required for using Jperl's techniques.

Edited by ValueTrader
spelling mistake!

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Hi all,

 

Is there a way I can watch this where I can pause the video or go back.. fast forward etc. There is a wealth of info in these videos and it would help hugely to be able to go back after the initial view without having to watch the whole thing again.

 

Many thanks!

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Hi all,

 

Is there a way I can watch this where I can pause the video or go back.. fast forward etc. There is a wealth of info in these videos and it would help hugely to be able to go back after the initial view without having to watch the whole thing again.

 

Many thanks!

 

Get yourself a copy of SWF opener here:

http://www.browsertools.net/

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Thank you, Jerry for a valuable discussion and all your effort.:applaud:

 

I don't have ensign, but TOS (Think or swim) has VWAP and Volume Profile indicators. Should these be started at 9:30 AM each day, or are they running continuously?

 

Regarding ensign - are these indicators proprietary or standard?

 

And last - is 2 minute chart the optimum for trading this method?

 

Thanks again. :)

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