How to Use Volume (VWAP) to Improve your Trading 📈

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Volume Weighted Average Price. http://www.financial-spread-betting.com/course/volume.html PLEASE LIKE AND SHARE THIS VIDEO SO WE CAN DO MORE! Trading tips and tricks, how to use volume to improve your trading - Hidden Secrets of the Volume Weighted Average Price. We’ve already seen how you can use a moving average to find inflection points, and how you can make profitable trades simply by seeing how the price reacts to the moving average. However, the potential problem with the moving average is that it takes no account of the volume of trading. There could be one contract bought and sold a long way away from the current price, and that would be immediately reflected in the moving average, distorting the actual sympathy of the market. That’s why the Volume Weighted Average Price (VWAP) can be very useful as an alternative.

As an indication of how useful the VWAP can be, you should note that a lot of pension plans use it as a benchmark when considering their trades. The VWAP allows the institutional investor to have as little impact as possible on the price when trading in or out of the shares, as it more reasonably represents the market sympathy taking into account trading volume. With the quantities of trading that institutions do, it is important that they do not upset market sentiment and impact the costs of their own trading – for instance, by buying too enthusiastically they might find that they were forcing the price up and costing themselves more for the position, and using the VWAP mitigates this effect.

The Volume Weighted Average Price can be calculated on a daily basis by taking the sum of all the numbers of shares bought times the price for those shares, and dividing it by the total number of shares that were traded. It can also be calculated on an intraday basis, using the same principles.

For comparison with a simple moving average, it is useful to plot them both on the same chart. Although it’s only become popular fairly recently, most charting software now includes the VWAP. If you are trading in a trend, you use the indicator in a similar way to previous indicators, such as the moving average, Bollinger Bands, etc.

The individual trader is not concerned with market impact in the same way as institutional investors. To use the indicator, you’re looking for the price to retrace down to the VWAP (in an uptrend), and then expecting it to take support from the line and increase again. The price may break below the VWAP, in which case you could take a long position once it broke back to the upside.

Provided the trade works out, you can anticipate to exit at the high of the day. The stop loss should be positioned at the most recent low point in case the uptrend fails. If you are trading in a downtrend, of course you should reverse all these guidelines.

Some traders believe that the VWAP is one of the great indicators, and use it consistently. Others say that it is not so useful as a trading trigger because in a strong trend, the price is unlikely to move far enough to touch the VWAP. Either way, it’s interesting enough that you should explore what you can do with it.

Видео How to Use Volume (VWAP) to Improve your Trading 📈 канала UKspreadbetting