Skip to main content

What is the VWAP & How Do You Use It?

 The Volume Weighted Adjusted Price (VWAP) gives the average price a stock has traded at throughout a day based on its price and volume. The VWAP is mainly used to determine a stock’s direction and valuation. Some traders like it because it is great for intraday trading as well as adjusting a stock’s price for its volume.


How to Read the VWAP


    Above is an example of the VWAP. What is important to note is that in many cases, a VWAP can be used as a line of support or resistance. Many stocks may have a history of using their VWAP as these trend lines and therefore you would want to focus on this instead of drawing trend lines yourself. In the case above, the VWAP is acting first as a line of support. When the candlesticks break below the VWAP, there is a massive drop in share price. After this drop, the VWAP acts as a line of resistance and the share price has a difficult time breaking above it. If the candlesticks did break above the VWAP, you could most likely expect a large upwards jump in share price. Remember, a VWAP is used for intraday trading and can be considered very limited. Look into this one more to decide if you would like to use it.

How to Configure the VWAP

    When setting up a VWAP, you can choose to display many standard deviations but most traders choose not to. All you need to do is pick your colors and it is set up.

Popular posts from this blog

Trading Different Time Frames - Day Trading vs. Swing Trading vs. Investing

 When starting to trade, it is required to decide which time frame you would like to trade. When you hear of people "investing in the stock market" (such as a retirement account), this is most likely long-term investing. However, many people are starting to utilize short-term trading, such as day trading and swing trading, as a source of income or even a hobby. In this article, we will explore how to decide which time frame is best for you and how to do so efficiently. Long-Term Investing     Long-Term Investing is the most common type of investing in the stock market and usually is any investment over 6 months. The main purpose for long-term investing is for growth and does not require much attention. This is because most investments in a long-term investor's portfolio are usually safe, blue chip stocks that have a very high chance of increasing over the long-run.     A common strategy for long-term investors is to buy after a market dip and reinvest the divide...
Read more

What are Volume & Float?

 Volume and float are two of the most important terms you must know when trading a stock. Volume is the specific amount of shares being traded in a given day or moment. Volume is very important because it allows you the liquidity to be able to buy and sell shares when needed. Without a high volume, buy/sell orders may be executed but temporarily not filled. This means that the order will not go through until there are shares ready to be traded.       Float is the total number of shares of a company that are available for people to trade. Float and volume are what allow for a stock to have volatility, or the 5 amount of movement a share price undergoes. If a stock has a low float but high volume then it will have high volatility, and if a stock has high float and low volume then it will have low volatility.       An example of high volatility could be as such: if a stock’s float is 50 million and its volume is 5 million then that is 10% of th...
Read more

What is the RSI & How Do You Use It?

       A stock’s Relative Strength Index (RSI) is used to compare a stock’s current price to its previous prices. This can be used to determine if a stock is overbought or oversold, or essentially expensive or cheap. If a stock’s RSI is overbought then it is considered expensive and if a stock’s RSI is oversold then it is considered cheap. How to Read the RSI      As you can see, whenever the RSI passes below 30, it is considered oversold and when it passes over 70 then it is considered overbought. The RSI indicator can help determine when a stock is good to buy as well as the general direction a stock price is moving compared to its last price. Remember even though a stock’s RSI is under 30, you should not always buy. It is important to look further into other technical indicators to determine if you should execute an order.      The RSI can have trend lines just like candlesticks can. In the case above, it looks like the RSI has a li...
Read more