If you trade along with VWAP, you’ll be trading alongside the BIG Player. Today there are over a thousand technical indicators for us to use in day trading, swing trading, and position trading. But most of these indicators only hinder. In this article, you’ll get to know an indicator that actually helps in reading the market instead of just cluttering your chart.
It’s one of the best indicators in technical analysis. Let’s see everything about VWAP, how to use it, best setups, and if it works in the mini index and mini dollar. And I’ll show you VWAP strategies, tested and proven over decades, that I’ve never shown in over 4 years of the channel. By the way, if you don’t know me, I’m Caio, and this is the channel “The Market Guy.”
VWAP is a benchmar of the execution of large lots
VWAP is a Technical Analysis indicator. The acronym comes from the English VWAP, Volume Weighted Average Price. That is, it’s the volume-weighted average price. It’s known as a “benchmark for executing large orders.” What does that mean? Institutions have it as a reference for a good price to enter or exit positions causing the least possible impact on the market.
Large orders are executed at VWAP, and this provides us with entry setups in the trade that I’ll show later. Look here on the chart, VWAP is this green line. For this to be a complete lesson and for you to understand VWAP forever, I’ll explain how it’s calculated, and then we’ll go back to the chart to see the entry setups by VWAP.
O cálculo da VWAP considera o preço e o volume
The calculation of VWAP is as follows {type “VWAP = Typical Price X Volume / Cumulative Volume”), let’s break down this equation. The calculation of VWAP starts when the market opens, the previous day doesn’t matter, unless you’re using a weekly or monthly VWAP which I’ll explain later, but generally, people use the VWAP of that trading session.
First, you want to know this guy here, the so-called Typical Price, (circled Typical Price). Just add high, low, and close and divide by 3. Look here (show on Trading View settings). That is, you’re taking the average of the high, low, and close, and so we have the first component of our VWAP equation.
The VWAP considers the price adjusted by the volume
I’m going slowly so everyone can follow the reasoning, if anything write in the live chat and I’ll slow down, just kidding this is recorded. (Slap) The next step is to multiply this value we’re calling Typical Price by the volume in the period. Remember that VWAP has volume as a weighting element?
Unlike a moving average, which is concerned with price over a certain period, VWAP is concerned with the volume-adjusted average price. And here in the formula, we’ll divide everything by the total or cumulative volume, which is the sum of all the volume traded up to that point in the market. Look how interesting. This gives you greater precision in determining an important price level for the market, the more volume traded at a certain price, the more relevant it will be in the calculation.
The best option to trade
Let’s say you’re on a 5-minute chart of the mini index that we operate through BTG Pactual, a partner of the channel, link for you to register in the description, but the lesson I always give here through Trading View. But if you want to place buy and sell orders in the mini index mini dollar go through the Profit Chart platform through the BTG broker.
– Strategies
– Support and Resistance
– Confluence mm200 or Fibonacci
Watch my VWAP video: