VWAP Vs Pivot Points

[smuhr 10]

Good evening,

 

For day trading, is VWAP better than Pivot Points ?

 

What is your point of view ?

 

Regards,

Steven

[sevensa 10]

Good evening,

 

For day trading, is VWAP better than Pivot Points ?

 

What is your point of view ?

 

Regards,

Steven

 

It depends what you want to use it for, doesn't it?

 

What is better? A Land Rover or a Porsche 911?

[Eric Johnson 10]

For me it comes down to how will the market respond to the tool? There are so many indicators and lines to put on a chart. I think that more people use pivots and respond to them. Remember that there are daily, weekly and monthly pivots. I put the weekly on my 60 minute charts and daily on my 5 minutes. They carry weight like trend lines.

I use the VWAP for isolating a conditional trade that has a high predictability. It is like pattern recognition and specific parameters for execution.

My charts can lean to the complex side, because I am very familiar with my tools and I prefer the confirmation of as many tools that enhance the outcome, and filter fakeouts. Why settle for two, when with careful work and paintbars, you can have confirmation, visuals for stops, cycle forecast lines, and alerts to make trading more precise, and for me simpler. It is a checklist.

Some people don't care for complexity. For me the basic simple chart is like binary computer code of zero or one. The advanced chart like a programming language. Finally there is a highly functional chart, like windows operating system. The complexity is hidden behind paintbars and alerts. The design work is refined and for each market condition, the tools are available. When you have a question of validity of a trade, there are confirmations and preset qualifiers. Also with alerts, you are not watching the screen over trading.

So to keep with the subject, use them both, and develop tools to determine market conditions that they work best in.

I attached a chart that is an example of what I mean by paint bar simplicity. It is running about 30 tuned indicators that are hidden, but trigger when the paintbars show. So simply when I get a vertical concentration of paintbars it means to me, the trend is weakening, get ready for a pullback or some choppier trading. The paintbars are color coded for early warnings in oscillating markets, and some to find the momentum tops of longer trends. Quotetracker makes this process reasonable to set up.

Edited January 7, 2010 by Eric Johnson

[BlowFish 10]

Both are watched by enough people to be interesting. Both are good as reference points to let you know 'where you are in relation to' and both are OK places to initiate trades though you will obviously need a few rules. If I wanted (a computed) horizontal line I would go PP for a sloping one VWAP. (though you can easily make a PP slope should you so desire). Another concideration is whether volume information is available personally I would not consider a VWAP for spot FX.

[Eric Johnson 10]

There seems to be a many versions of the VWAP out there on different platforms.

VWAP Based Pivots | NeoTicker Blog

Anyhow I thought I would add this aspect for definition before the thread progresses or gets confusing.

For Quote tracker it is a line that changes location according to how many bars you have on your screen viewing at one time (panning).

Well, I get frustrated with the limited time to edit a post, so please bear with me as I post a clearer chart that I would have preferred.It relates to my previous post about a complex hidden indicators, made useful by paint bars and alerts. The paint bars are showing up in vertical concentration at points of trend weakening. The light blue line is the VWAP.

[smuhr 10]

It depends what you want to use it for, doesn't it?

 

What is better? A Land Rover or a Porsche 911?

 

I would like to use it for 5 min - 15 mins trades.

Like PP VWAP allows you to find S/R.

[sevensa 10]

I would like to use it for 5 min - 15 mins trades.

Like PP VWAP allows you to find S/R.

 

I doubt that one is better than the other. Some days one will look like S/R and other days price will just go through it like they don't exist. The "advantage" of PP's are that you have more lines, so a better change to have prices reached some of them.

 

VWAP has a bit of logic behind it, but PP for me are just lines without any logical reason behind them and I haven't seen a system trading them profitably. Some people even draw the midpoint lines between R1 and R2 and S1 and S2. If you draw enough lines, some of them have to look like providing S/R at some point. Thinking something will provide S/R just because a formula based on yesterday's OHLC say so makes no sense to me and is the same than moving averages that people claims provide support. You can draw any length moving average and see that at some point it look like they provide S/R.

 

If you want to learn S/R, I suggest you look at the DBPhoenix's thread on here about defining S/R in foresight. That makes more sense to me than drawing random lines on a chart thinking they will provide S/R.

[BlowFish 10]

I would like to use it for 5 min - 15 mins trades.

Like PP VWAP allows you to find S/R.

 

That still doesn't completely answer svensas question. In my previous post I suggested some things both are OK for. Personally if I where you I would ask myself 'what do I want to achieve'? rather than put the emphasis on the tool, 'what is this tool good for'?

 

Hand drawn S/R is likely to be superior to both PP & VWAP however both are adequate to trade against in a similar fashion to S/R. When you get down to it you will find at times that both appear to turn price to the tick (and you will likely swoon) and at other times they both will be chopped to death (have price oscillate around them) and you will likely curse.

 

Why not use excel to see which appears best for what you want to do? You are far more likely to have faith in your findings than some anonymous poster on the interwebz aren't you? For example last I looked the ES will trade within a tick or two of the daily pivot over 68% of days.(you can construct hourly pivots or 150tick or 2.5 day pivots btw) . That information could possibly be used as the basis for a profitable strategy. (and I know of one vendor that sells such a system).

[smuhr 10]

Hand drawn S/R is likely to be superior to both PP & VWAP however both are adequate to trade against in a similar fashion to S/R.

 

As you said : "Hand drawn S/R is more efficient". I should have more self-confidence in my price action analysis.

 

With VWAP or PP I just want to verify my supposition and find high propability S/R.

[DugDug 10]

I actually thought VWAP (volume weighted average price)---(this is the same thing) was introduced by institutions in order to measure how good a brokers executions were over the day.

So while I guess it might an offer of where you would expect some reversion to the mean to occur throughout the day - it seems that a Moving avg would do much the same thing?

whereas a PP is looking for turning points in the market.......kind of very different.

 

maybe you could combine the two?

look to enter as a reversion to the mean, after a pivot point!

(or possibly I am missing the point)

[BlowFish 10]

DD correct the VWAP factors in the volume traded at each level so for example if 1000 trade @ 99 that would weigh one thousand times more than 1 @ 99. It is also an average of the whole sample (though where you start the sample is arbitrary) It is pretty different to regular moving averages.

 

VWAP = SUM (PriceN * VolumeN) / Total Volume for whole sample.

 

(Where n is each trade in the sample). This can present some computational difficulties for large samples as every element needs re weighing when a new trade arrives (because total volume changes).

[zdo 20]

I've heard of regenerating PP's at intervals through the day.

Does anyone have ideas or experience with VWAP's that have multiple start / restart points instead of just once at the beginning of one's session? thx

[BlowFish 10]

Hi ZDO,

 

PP's ('floor' pivots) are very robust. They seem to exhibit similar characteristics based on the previous weekl, hour, or 10,000 contracts. Put another way there seems to be more to them than just self fulfilling prophecy. When you think about how they are constructed you can understand why.

 

To answer your question you might want to look at Ray Baross' midas. Essentially a VWAP plotted from a recent swing high or swing low (well thats what I think it is).

 

Jerry talks about starting them in different places too. (Intraday for scalping and further back for swing trades). That is one of the beauties of VWAP you can pick your sample to give yu the characteristics that you desire. (You can do the same with PP's too though).

[DugDug 10]

While moving averages and VWAP are different - as MA is based on price, and no volume, one issue that might arise for both, but particularly the VWAP - is the dark pools and other areas of unreported liquidity, OR volume that is based on some algorithm whereby the trade and volume is not really reported until after the close. Particularly with stocks.

 

Whereas PP are realy just based on the recorded prices at the exchanges.

 

As per every system/tool I guess its a matter of using either as a tool and finding something that makes sense, is repeatable, profitable and not subject to too many variables, such as recalculation variables dependant on when the counts start.

(this always makes me stear clear of many things such as angles and slopes on a chart - in my book they are ridiculous as you can just change things to suit yourself and make anything look good)

[FulcrumTrader 10]

The main reason I have never used these type of perceptional indications is that all are based on a computational based assumed reality. Most frequently the plots of these various projected realities have almost no alignment with the true factual state of the key volume distributions intraday. Where real volume has been proven to be distributed and real butts are on the line with actual held resting inventory will always be the facts within the markets. As the market trades between these real zones of accumulated inventory, where large positions are being held or capitulated, that is where you will find the intraday realities in the correlated volume/price action.....and most frequently not from computational projections.

[BlowFish 10]

I guess you are talking more about PP's Fulcrum? VWAP is not a 'projected reality' unless you choose it to be (by selecting a data sample from the past). It is what it is (a statistically significant metric) and that is why it has numerous applications from algorithmic trading to measuring the performance of a trader working a large order.

[enochbenjamin 10]

I actually use VWAP with Standard Deviation Lines in conjunction with pivot points. I also like drawing trend lines and if a trend line break occurs around a level with both pivots and VWAP/SD I am confident about the possibile outcome of the trade.

[FulcrumTrader 10]

I guess you are talking more about PP's Fulcrum? VWAP is not a 'projected reality' unless you choose it to be (by selecting a data sample from the past). It is what it is (a statistically significant metric) and that is why it has numerous applications from algorithmic trading to measuring the performance of a trader working a large order.

Correct....pivot points for the most part. I will say though, VWAP is still averaging the days information and creating a computational reference line that may or may not have anything to do with where smarter money sees value in that current market. VWAP can also give some really bad skews on days when multiple levels of resting inventory all get neutralized over a short period of time (like a hard trend day).

 

I do know a few profitable traders who do use VWAP in limited roles, so for some they may find value in the information provided.....and that is not a bad thing.

[FulcrumTrader 10]

Now somebody like Blowfish, who is a heck of a lot better at programming than me, should build a VWAP of the days Cumulative Delta Volume and Price averaged together......that one I will gladly back-test!!!

 

BTW.....I HATE programming stuff!!! :crap:

[BlowFish 10]

Now somebody like Blowfish, who is a heck of a lot better at programming than me, should build a VWAP of the days Cumulative Delta Volume and Price averaged together......that one I will gladly back-test!!!

 

BTW.....I HATE programming stuff!!! :crap:

 

You know what it's on the to do list! I am not sure what it will show but I figure it might provide some pretty interesting metrics! With my renewed interest in 'delta stuff' (3rd time round now) my primary interest is selecting robust tools and data to work with. I guess the obvious choice is IRT/DTNIQ. Neoticker in the spirit of not being obvious Neoticker would fit the bill too it's whole architecture lends itself to this sort of work.

[FulcrumTrader 10]

You know what it's on the to do list! I am not sure what it will show but I figure it might provide some pretty interesting metrics! With my renewed interest in 'delta stuff' (3rd time round now) my primary interest is selecting robust tools and data to work with. I guess the obvious choice is IRT/DTNIQ. Neoticker in the spirit of not being obvious Neoticker would fit the bill too it's whole architecture lends itself to this sort of work.

Yes.....for the life of me, I do not know WHY Neoticker will not add Cumulative Delta candlesticks????????????????????? :o

 

I know L.C. seems like a sharp guy so why not add some simple CD candlesticks......hmmmm?

Edited February 1, 2010 by FulcrumTrader

[BlowFish 10]

Yes.....for the life of me, I do not know WHY Neoticker will not add Cumulative Delta candlesticks????????????????????? :o

 

I know L.C. seems like a sharp guy so why not add some simple CD candlesticks......hmmmm?

 

Yeah indeed very sharp, he also seems to have a really good grasp of trading issues and needs. One option of course is to string together a bunch of more general components and tools. Database, some sort of data adapter, maybe matlab or R for analysis. I really don't have the inclination for that scale of project right now.

 

Actually I'd use MC just for fast testing I am trying to get them to implement reading historic bids/ask info. Having said that there are some question marks over processing integrity.

[Karish 10]

You can get CVD in Neoticker in a snap - calculate using DayTotalBidTrades, DayTotalAskTrades CVD.

To display indicator as candlestick in the indicator setup, Meta style display as: candle, and you got it.

[BlowFish 10]

You can get CVD in Neoticker in a snap - calculate using DayTotalBidTrades, DayTotalAskTrades CVD.

To display indicator as candlestick in the indicator setup, Meta style display as: candle, and you got it.

 

I think you misunderstand what FT wanted. He was after a plot type where a new candle starts painting after a nnnnn delta change. So similar to a constant volume, or constant range chart but with new bars triggered on delta change.

[Karish 10]

Thx for clarification , I would than recommend to feed the created CVD to NT UDS - user defined symbol and create a data series which is the actual underline contract CVD, this newly created series can be displayed by using all kind of bars supported by NT.

Use price series synced to this Series. Little long but achievable.

Hope it helps.