You have gone through many VWAP trading strategy, but my process is the power-packed one.
At the end of this article, you will be the master of intraday VWAP trading strategy.
I am in love with this strategy.
Let’s start working and learning together.
There are two types of VWAP trading strategy
- Gap up VWAP trading strategy.
- Gap down VWAP trading strategy.
Both the strategies are most probable and profitable.
What Is The Reason For The Occurring Gap Up In The Market?
The reason for the gap up is, the overnight traders will sell the stock for-profit, and the new traders jump in to buy that stock if the catalyst is strong, and the script will open in the gap up for the next day.
What Is The Reason For The Occurring Gap Down In The Market?
If stock gaps down, some traders will sell the stock with panic, and some investors buy that stock in thought that it could be a good opportunity if the fundamentals of the scrip are good.
Therefore first 5 to 10 minutes, there would be the violent price action that arises from heavy buying and selling, so heavy volumes.
So we should watch for the price action and allow the other traders to fight each other until one side wins.
After volatility decreases, the stock will move in a direction, so we can adopt a strategy here to trade the stock at a test of VWAP.
Volume Weighted Average Price Strategy (VWAP):
It is an essential technical indicator for the day trader.
VWAP is a moving average that takes into account the volumes of shares been traded.
VWAP tells who is in control of price action, the bulls or the bears.
Above VWAP, buyers control the price, and below the VWAP, sellers are gaining control over the price action.
Professional traders buy and short the stock near the VWAP levels.
After the opening, the stock will trade heavily in the first 5 minutes.
In a gap-up stock, if there is a buying interest by the institutional traders, the scrip will trade above the VWAP and move high”s.
So it is an excellent opportunity to buy when price takes support at the VWAP.
If the price rejects VWAP and starts to move down, it means many traders are selling the stock for profits, so it is an excellent opportunity to sell the stock short when the price takes resistance at the VWAP.
If there were no interest in the stock from institutional buyers, the scrip would move in sideways near the VWAP level.
We should stay away from the stock in this case.
If stock finds support at VWAP, we can buy the stock.
If a stock faces resistance over VWAP, we can short sell the stock.
Stop-loss can be placed above and below the VWAP, and the target will be the following support and the next resistance.
We can confirm our buying position by analyzing the 15-minute chart.
Price should be above the VWAP in buying position.
Price should be below the VWAP if we are shorting the stock.
I recommend waiting for at least half an hour by taking any position if you are not confirmed with the direction.
Using a 15-minute chart will confirm the direction of the stock, but for entering the trade, use a 5-minute chart.
How To Pick The Stocks For VWAP Trading Strategy?
While trading the VWAP trading strategy, I always choose the stock that had opened the gap up above the 4%.
I always choose the stock opening the gap below the 4% for the opening gap down strategy.
Average volume should always be more significant than 100k because we want the higher volume of the stock to move.
We should not always be stuck with moving fewer stocks.
For Intraday VWAP trading strategy, observation of the candlestick patterns is more important for the trade probability.
Catalyst is an essential character to be considered for day trading.
With a strong catalyst, a stock can move 10 to 15 % in a single day.
If a catalyst is a negative side for the stock, it will fall.
If a catalyst is positive for the stock, it will rise.
But for some time, a single catalyst behaves as negatively and positively for the different stocks.
For example, there was news in the market for merging three banks like Bank of Baroda, Vijaya Bank, and Dena bank.
The next day, Baroda and Vijaya bank had opened the gap down, and Dena bank had opened in the gap-up.
The same catalyst is acting both negatively and positively at the same time for different stocks.
You can scan the stocks based on the news for the gap up and gap down strategies.
VWAP trading strategy are the most probable and profitable, and they may give a 1:2 and 1:3 risk-reward ratio.
Only one tool that will be helpful for the intraday VWAP trading strategy is VWAP.
VWAP and the stock screeners will be available in the trading view platform most accurately.
For intraday VWAP trading strategy, a higher time frame is used to predict the stock direction.
You have to mark the support and resistance levels in the chart before taking the trade.
I recommend large-cap trading stocks because an individual can’t manipulate the scrip, and the movement will be based on that stock’s news and financial status.
These types of trades will be more practical and most probable.
If you are interested in taking these types of most probable trades, you may contact us to be a profitable and most probable trader.
These are the only samples.
The original program will be in our private groups and our course.
Nifty Support and resistance predictions will be available on many websites; you may go through that.
For applying these nifty support and resistance predictions, the best platform is https://tradingkid.com/go/trading-view. trading view
I am not a trainer; in the stock market, there are no trainers; all are learners.
IN TRADING, ALL ARE PROBABILITIES.
Check out our trending articles.