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

What is Catalyst Trading? - How to Trade Upcoming Events

 Catalyst Trading is when you play off of the hype in anticipation to an event that affects a stock's price. This is a very simple way to try to capture profits in, usually, a smaller time frame than most investments. There are many different types of catalysts that can cause a stock price to increase and there are many resources to use to find these catalysts. It is important to understand that just because there is a catalyst, it does not mean that the stock price will be affected by it. When researching into different catalysts, it is clear that some provide higher returns than others. Also, it is important to research into the stock that has the catalyst. An easy way to tell if it is worth investing is looking into that specific stock's previous catalysts. If that stock has previously reacted positively to catalysts, then it is reasonable to assume it will do so again.  With that being said, let's look into some different types of catalysts that are easy to track: Earni...
Read more

What are Screeners & How Do You Use Them?

 A screener (or scanner)  is a tool that allows you to sort through the market to find stocks with certain criteria. Just like indicators , screeners are part of your preference and just because someone else likes a screener and has success with it, it does not mean you will certainly find success with it. It is important to explore screeners and do your own research and testing to find which screeners are the best for you. In this section, I will give some basic ideas of how to find good stocks using a screener. Where Do You Find Screeners?      Many screeners must be paid for but there are some that are free to use. On top of this, when looking for a screener you want to decide if you want to use a passive or active screener. A passive screener  is always finding new stocks that fit your specific criteria, but the free ones offered often do not have as many filters available to them. An active screener  is not constantly updating but usually hav...
Read more

What are ETFs & How Do You Trade Them?

 An Exchange Traded Fund (ETF) is similar to a Mutual Fund in the fact that it is a group of stocks that you can buy through one ticker symbol. However, ETFs usually often contain stocks that all have something in common (Such as an index, market, etc.). They are popular for investors who want to trade both in the long-term and the short-term, depending on which ETF you choose to invest in. In this article, we will discuss different types of ETFs and how to trade some of them efficiently. Index ETFs     One of the most common ETFs that are used/recommended by many investors are Index ETFs. Index ETFs  are a group of stocks that are included in one popular index that you can invest in, basically allowing you to invest in an index. One of the most common Index ETFs is the S&P 500 ETF. Three of the most popular S&P 500 ETFs are: 1.)  SPDR S&P 500 ETF Trust (SPY) 2.)  Vanguard S&P 500 ETF (VOO) 3.)   iShares Core S&P 500 ETF (IVV)...
Read more