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VWAP Trading Strategy (STOCK Selection & Trades) - Intraday Trading 馃敟馃敟 - YouTube
Channel: Trade With Trend - Raunak A
[1]
- So in this VWAP
trading strategy video
[2]
I'll give you some quick
tips on stock selection,
[5]
and then I will explain
how I selected one stock
[8]
that is Hind Petro and
traded it over the next
[10]
three to four sessions
to make 5% gain.
[13]
Towards the end of this video,
[14]
I'll also explain two variations
[17]
of VWAP trading strategy.
[19]
So, before we get started,
let me show you how
[21]
to set up chart on
tradingview.com.
[23]
I think many of
you struggle here,
[24]
so let me explain this.
[26]
So, let me first
explain how to get
[27]
the VWAP indicator
and MVWAP line.
[30]
So, just click on the indicator
link here, scroll down.
[33]
You will get the VWAP indicator.
[35]
So, click on this and close it.
[37]
You will see VWAP
indicator is added here.
[41]
Now, to get the MVWAP indicator,
[42]
just go to indicators
again and type here,
[45]
"exponential moving average."
[48]
So, you get this moving
average exponential.
[51]
Click here, and it will
get added on the chart.
[53]
Now, on the exponential
moving average indicator,
[56]
just click on this,
[58]
and in the input
section, instead of close,
[61]
just select VWAP,
[63]
and the parameter that you
have to enter here is 50.
[67]
So, once you do this,
your basic chart is ready
[70]
with VWAP indicator
and MVWAP line.
[74]
Now, once you set up
indicator and MVWAP,
[77]
now go to the Pine editor
and remove everything here,
[81]
and go to the comment
section below.
[83]
I have mentioned the code
for narrow range clusters.
[87]
Just copy that code,
and paste it here.
[90]
So, I'm pasting the code here,
[92]
and then what you do is just
click on "add on chart."
[97]
Just minimize this,
[98]
and then you get
these black dots.
[100]
So, all of these black
dots that you see
[102]
are narrow range candles.
[104]
So, I sincerely hope this
basic setting up of chart
[107]
for tradingview.com
is now clear.
[109]
So, once you've
followed all the steps
[111]
that I've just shown you,
[112]
you will then get this chart.
[114]
So, this orange line that you
see is the VWAP indicator,
[117]
and the blue line that you see
[118]
is the MVWAP indicator,
[120]
and all these black
dots that you see here
[123]
are narrow range candle sticks.
[125]
Now, in one of the
videos I had covered
[127]
why narrow range clusters
are more important
[130]
than individual narrow
range candle sticks
[132]
that I have marked here.
[133]
You have to understand
one more thing,
[135]
that narrow range clusters
become more powerful
[138]
when price is in a
very defined range.
[141]
In this particular chart,
if you see for Hind Petro,
[143]
price is currently in
this particular range
[145]
the day before I was
about to trade this.
[148]
Now, as an Intraday trader,
[149]
it is absolutely crucial
[151]
that you understand
Volatility Cycle.
[153]
Now, there are two phases
within the Volatility Cycle
[156]
that is Volatility Contraction
and Volatility Expansion.
[160]
So, in Volatility Contraction,
[161]
price usually trades in a range,
[163]
and candles are very
narrow in range.
[166]
In Volatility Expansion phase,
[168]
price usually rises up,
[169]
or it falls down on
back of high volatility.
[173]
Now, knowing this is
extremely important.
[176]
As a day trader, you always
have to focus upon phases
[179]
where volatility is expanding.
[181]
So, you have to
focus on two things.
[183]
Number one, price
has to be in range,
[186]
and then you must spot
narrow range clusters
[188]
within that range.
[190]
Once you spot this particular
existence on the chart,
[193]
then you can expect
price to either move up
[195]
or move down in the
following sessions.
[198]
So, this particular
chart of Hind Petro
[199]
I had Tweeted about
one day before
[202]
because I had spotted
this stock in range,
[205]
and all these narrow
range clusters
[206]
were consistently showing up.
[208]
So, let me now show you
how I traded Hind Petro
[211]
over the next two
to three sessions.
[212]
So, on the first trade,
price actually gaped up,
[215]
and we got these
two hammer candles.
[218]
Now, while the body of these
candles is not positive,
[221]
look at the long tail here.
[223]
Both these candles
represent bullishness,
[226]
and do not forget that
price has gaped up,
[228]
so, naturally for the day's
session, was positive.
[231]
The entry candle was
this particular candle
[233]
that I'm showing here.
[235]
Now, during this candle,
[236]
this actually engulfed
these two prior candles,
[239]
and hence this was
extremely positive.
[241]
Even volumes on this
candle was fairly okay,
[244]
and hence this became
my entry price at 309.
[248]
So, as far as exit is concerned,
[250]
I exited this trade at 312,
[252]
and let me now explain this.
[254]
So, when I entered
the trade at 309,
[256]
price had already moved about 3%
[259]
with respect to the
previous trading session,
[261]
and hence my main aim here
[263]
was to take out 1% to 1.5%,
[266]
as price had already
moved quite a bit.
[269]
I also a spotted a couple
of these bearish candles
[272]
though they were
not high on volume,
[273]
and I was hence more
inclined to get out
[276]
somewhere between
1% to 1.5% gain.
[279]
Now, this is more logical
[280]
because once price has gaped up,
[282]
you should always be in a
position to book out profit.
[286]
That is the more
logical thing to do
[288]
rather than waiting for
price to move up 7%, 8%
[291]
because that actually
happens rarely
[294]
when it comes to day trading.
[296]
So, the second trade
that I did in Hind Petro
[298]
was when I entered at 312,
[300]
and then I exited at 318,
320, 321, and 322.
[306]
So, let me now
explain this trade.
[309]
So, for this particular trade,
[310]
again gap up happened,
[311]
but the gap was gap was less
[313]
when you compare it
with the previous trade.
[314]
First candle was bullish.
[316]
You can see long tail here,
[318]
and even the candle
body was strong.
[319]
Second candle that you
got was not that negative.
[322]
It did engulf the
previous candle's body,
[325]
but then the first candle
[326]
also had a beautiful
hammer pattern,
[328]
and this hammer pattern
was actually forming
[331]
above the range of
previous session.
[334]
So, entry candle was
this particular one
[335]
because this actually broke
out of the daily range,
[338]
and then I entered at 312.
[342]
So, do note here
that the entry candle
[344]
was actually not on
back of high volumes,
[346]
but at times I do this
[348]
because I was trading this
count the previous day,
[350]
and I did know that
[352]
there was some underlying
demand in the stock.
[354]
You then get this wide
range candle here,
[357]
and this candle
actually are used
[358]
to offer some bit
of positions at 318,
[362]
following which I exited
at 320, 321, and 322.
[368]
Now, I'll again
explain one more thing.
[369]
The moment you enter a trade,
[371]
and you get about 3% or 4% gains
[373]
in the next 20 to 30 minutes,
[375]
always think about
exiting the trades,
[378]
and what I do is,
[379]
instead of selecting these
weak candles to exit trades,
[382]
I always select wide candles
to exit my trades in VWAP.
[386]
Now, this is something
you must be seeing
[388]
when I update my trades
on Twitter and on blog.
[391]
So, when I exited the
trade in this region,
[394]
I certainly did not know
that price would retrace
[396]
and start consolidating.
[398]
I just exited based on the fact
[400]
that after I entered at 312,
[403]
within the first 60 minutes,
[404]
I was getting about
3% to 4% gain.
[407]
So by the time I
exited this trade,
[409]
my total gain in
Hind Petro was 4.2%.
[413]
So, the third trade
I did in Hind Petro
[416]
was at 322.6, that
is entry price,
[419]
and I exited the same at 326.
[421]
So, let me explain this.
[423]
So, the third day we
again got a gap up,
[425]
and I entered as this
candle was forming at 322.6.
[430]
So, second candle if
you see was also bullish
[432]
because you then get
this long tail here,
[434]
which is always a
sign of strength.
[437]
So, right about at this point,
[439]
price was already
about 2.5% higher
[442]
when compared to
previous session,
[443]
and I was waiting for some
strength candles to form,
[446]
and my exit in here
was somewhere between
1% to 1.5% gain.
[451]
So, this came around at
this particular candle,
[454]
where I exited at 326,
[457]
again on back of wide
range strength candle.
[460]
Now, I'll tell one more thing,
[461]
that when I exited
I did not know
[463]
price would consolidate
and move lower.
[466]
It was just that I was looking
to make only 1% to 1.5% here
[470]
because by the time
price reached 326,
[473]
Hind Petro was
already up 7% to 8%
[476]
over the last three sessions.
[478]
So again, situational
awareness here
[480]
was more important when it
came to exiting trades here.
[484]
You always have to
keep this in mind
[486]
because this is one aspect
that many day traders ignore.
[490]
So, at the end of third trade,
[492]
my total gains for
Hind Petro was 5.2%.
[495]
So, once I had done three
trades in Hind Petro,
[498]
I then stopped
tracking the stock,
[500]
and let me explain why.
[502]
So, the third trade actually
ended in this session.
[506]
So, the next
session, what I saw,
[508]
was price started moving lower.
[509]
Before this, you also
have to understand
[511]
that stock was up about 7%
[514]
in the previous two
to three sessions.
[516]
Now, as a trader, it is
important to be aware of this
[519]
because it is very natural
for a stock to take a breather
[523]
and enter a phase
of consolidation.
[526]
When I had this thing in mind,
[527]
I then spotted these
three candles here.
[530]
They were pretty high on volume,
[532]
and in this entire
movement that happened
[534]
from about 300 to about 328,
[537]
such candles were
completely absent.
[539]
So, this actually
indicated presence
[541]
of strong sellers in the market,
[543]
and this is why I completely
stopped tracking the stock
[546]
and switched over to few other
stocks that I Tweeted about.
[550]
I hope this particular
point is clear.
[552]
Now, as an intraday trader,
[554]
if you're looking to trade
a stock on the long side,
[556]
and you see such strong
bearish candles forming,
[560]
that is taking price lower,
[562]
then always switch away
from that instrument.
[565]
There are many instruments
available in the market.
[567]
So, when you spot such
candles on the chart,
[570]
always avoid
trading such stocks.
[573]
So, the next two
trades that I'll show
[574]
that is Infosys and ICICI.
[577]
This actually I did
on 6th of November,
[580]
and these two
trades are actually
[581]
variation of VWAP
trading strategy,
[583]
and, therefore, do
pay attention here.
[585]
So, Infosys was a case of
Hind Petro that we discussed.
[589]
Price initially moved up
and then got into a range,
[592]
and look at all these
narrow range clusters
[594]
forming on the chart.
[595]
After the initial
bit of movement,
[597]
look at the volume activity after
the ask price consolidated.
[600]
Volumes were
completely dried out.
[602]
I hope this aspect is clear,
[604]
and then we got this
wide range candle, here,
[607]
which was also accompanied
by volume expansion.
[610]
So again, a simple concept
of Volatility Cycle
[614]
is at play here.
[615]
As price got into range,
[617]
volatility started moving lower,
[619]
and then volatility
started expanding,
[622]
and price started moving
higher in this case.
[625]
Now, do note here that
in these examples,
[627]
I have used narrow range
candles to identify stocks,
[631]
but you have to remember
that this concept
[633]
does not work all the time.
[635]
With experience, you will know
[637]
how and when to use it,
[638]
and this is the main reason why
[640]
I keep emphasizing
on practicing trades,
[643]
as that is how you
will get experience
[645]
with VWAP trading concept.
[647]
So, let me now explain
this trade in Infosys,
[649]
where I entered at
702 and exited at 710,
[654]
and then at 713.
[656]
So, this trade was actually
[657]
a variation of VWAP
trading strategy,
[659]
where then I took entry
despite of VWAP indicator
[663]
being below the MVWAP line.
[665]
So, our rules state that
you have to only enter
[668]
when VWAP Indicator is clearly
above the MVWAP indicator,
[671]
but in this case,
I entered at 7-0-2
[675]
despite VWAP indicator being
below the MVWAP indicator.
[679]
Now, such variations
are very common,
[682]
and hence you have to be
aware of such situations
[684]
and how to trade these
on a regular basis.
[687]
For trading such situations,
[689]
you have to be aware of
underlying demand and supply,
[692]
and then you have
to decide to trade
[693]
based on volume expansion
[695]
and price moving high or low.
[698]
So, if you look at the
chart in front of you,
[701]
let us first focus
on this candle,
[703]
this particular candle, and
these two candles, here.
[707]
So, this candle, again,
you get long tail here.
[710]
This is not a hammer pattern,
[712]
but hammer pattern
usually has a long tail,
[714]
and hence you can classify
this as a hammer candle.
[718]
Again, volumes are high here.
[719]
So, you can argue
that there are some
[721]
sellers present in the system.
[723]
Now, as price
starts moving lower,
[726]
volume actually
starts to move lower.
[729]
There is no substantial
volume expansion here.
[732]
The only point where
you see volume expansion
[735]
is at this particular candle
[737]
and these two candles here.
[739]
This candle can be categorized
as a bearish candle,
[743]
though this has some
segment of tail here
[746]
but still this is
fairly bearish,
[748]
but when you come to
these two candles,
[750]
again these two candles have
long tails and high volume.
[754]
So, typically, this is not how
[756]
down-move plays out in market.
[758]
Also, take a note here that
[760]
as prices move
from 7-0-6 to 690,
[763]
you can just spot on strong
bearish candle, here.
[767]
Now, remaining
high-volume candles
[768]
clearly have long tails here.
[771]
So again, this is
a sign of demand
[773]
that as price is moving lower,
[775]
sellers are actually
failing to take
[777]
price lower with momentum.
[779]
You then get this bullish,
[781]
engulfing sort of pattern, here,
[783]
on high volumes,
[785]
and then you get this
wide range candle.
[787]
So, when I entered at
this particular point,
[790]
I was tracking Infosys
[792]
or previous one or two sessions,
[794]
and hence at this
particular point,
[796]
I knew that this was
a demand shift candle,
[798]
and price would move higher.
[801]
If not in this current session,
[803]
it was supposed to move
up in the next session.
[806]
This is usually how
reversal play out.
[808]
So, after I entered at 702,
[810]
price did consolidate sideways,
[813]
but there was no
meaningful retracement
[815]
within this wide
range candle here.
[818]
So again, this is a sign of
bullishness in the market.
[821]
Post this, you then
get these series
[823]
of wide range candles,
[825]
which I eventually
used to exit my trades.
[828]
I hope this is variation of
VWAP trading strategy is clear.
[832]
So, one more variation trade
I did was in ICICI Bank.
[835]
So, after the initial up-move,
[837]
price again started
drifting lower.
[839]
Look at the volumes here.
[840]
Volumes, again,
started moving lower,
[843]
and then you get these narrow
range candles on the chart.
[846]
Now, as price moved lower
from 472 to about 467,
[852]
there are three main bearish
candles that you can see.
[854]
One at this point.
[855]
Another one you get, here,
[857]
and the third one is at
this particular point.
[860]
Now, look at volumes of
all these three candles
[862]
despite of down-move happening,
[864]
there is no volume expansion
that you're seeing.
[867]
You then get volume
expansion at this candle.
[870]
These two candles,
again, have long tails,
[873]
and then price starts
to move sideways.
[876]
You then get this
hammer pattern here,
[878]
which is on back
of high volumes.
[881]
Now, those of you who are
familiar with bar charts,
[885]
this is also very
similar to a Pin Bar.
[888]
Now, I will cover this some
point in a different video,
[891]
but these patterns
that form on the chart
[893]
are usually reversal patterns.
[896]
So, in this trade, as
price was moving lower,
[898]
volatility was
actually contracting,
[901]
and then volatility
started expanding
[904]
once you got this wide
range candle here,
[907]
which finally became my
point of entry in the trade.
[910]
So, ICICI Bank trade was
actually taken at 471,
[914]
and I did exit at
477 and 480, I think.
[920]
So, this was, again,
a variation trade.
[922]
I entered when this
candle was forming,
[923]
while VWAP indicator was
clearly below the MVWAP line.
[928]
Now, I have clearly
said not to do this,
[930]
but I have just shown you
[931]
in the previous two examples,
[933]
on how to assess demand
and supply in the chart,
[936]
and then take such
variation trades.
[938]
In this region, as
price was moving lower,
[941]
especially in this
range that you see,
[943]
volume had completely
moved lower,
[946]
and then you've got this
wide range candle here.
[948]
Look at the volumes
accompanying this candle.
[951]
Clearly, strong buyers
were entering the market
[954]
as price was moving
on the upside.
[956]
So when it comes to variation
of VWAP trading strategy,
[959]
I'm looking at
two main elements.
[962]
One, volatility should contract,
[964]
and number two,
volatility should expand,
[967]
and price should
either move up or down
[969]
on back of volume expansion.
[972]
Now, this is absolutely crucial.
[974]
See, the thing is that
[975]
you have to understand
with VWAP indicator,
[978]
that it is the overall
price structure
[980]
that plays a huge role in
trading it successfully.
[983]
Now, through such videos,
[984]
I'm just trying my
best to help you
[986]
understand the
same in the market.
[988]
Now, when it came to
exiting the trade,
[991]
I did so at 477 and 480.
[994]
So again, I have
used the principal of
[996]
strength candles that
is wide range candles
[999]
to offload my positions
in the direction of trend.
[1002]
So, in this particular trade,
[1004]
when I entered ICICI Bank,
[1006]
momentum in Bank Nifty,
[1008]
that is the parent index
was actually strong.
[1010]
So, I decided to
hold this trade more,
[1013]
when you compare it
to the Infosys trade,
[1015]
I just explained.
[1016]
So, in this particular
trade I eventually exited,
[1019]
I think at 3% and 3.5% higher.
[1023]
So, all the important links
[1024]
with respect to VWAP
trading strategy
[1026]
and intraday trading is given
in the description box below
[1030]
and in the comment
section below.
[1032]
Do check out the same.
[1033]
So, kindly consider
hitting the "like" button
[1035]
and sharing this video if
you find the content useful.
[1037]
Thanks a lot for watching
this video, guys.
[1039]
Take care, and be safe.
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