What's new New posts Latest activity. R2 is pushing price nicely down. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. He needs to spread that out. If you put a point on a chart that showed where the million shares of Facebook, FB , traded Wednesday, to get a sense of where there will be price memory, this would be that one point.
In essence every closed transaction is recorded. However, most charting websites and individual investors may prefer to use one-minute or five-minute trading prices in order to cut down on the sheer volume of data required to keep track of VWAP in a day. For a five-minute VWAP calculation you would take the low, plus the high, plus the closing price within the five-minute period and divide the total by three.
This gives you a time-weighted average price TWAP that is fairly accurate, and you can multiply this number by the volume traded in the same period to achieve a weighted price. Large institutional buyers and mutual funds use the VWAP ratio to be able to move into stocks in a way that will not disturb the natural market dynamics of a stock price.
If these buyers were to move into a stock position all at once, it would unnaturally elevate the stock price. Yet buying purchasing shares under the intraday VWAP moving average , these buyers can move into a stock over the course of a day or two without too much price disruption. However, there are other uses for the VWAP, and one such strategy is to purchase a stock for individual investors just as the VWAP pierces the intraday VWAP moving average, as this can indicate a momentum shift in the share price.
It is also used in algorithmic trading and allows brokers to guarantee the execution of a trade near a certain price volume for clients.
VWAP is cumulative indicator and as such the number of data points increases throughout the day. As a day trader in you can use other indicators to determine if the price is good to buy or hold or sell. But what if you are David Einhorn or Carl Icahn or even Bill Ackman and you need top buy 10 or 20 million shares to get to your position size. That will impact the stock price and it will always be moving against you. These behemoths instead pay someone to trade into the position for them.
He needs to spread that out. Sal probably has an algo for this or a broker that he will pass it to that does. Their algo has historical minute by minute maybe even thinner sliced historical volume profiles that is will use to buy to shares at a time constantly through out the day.
If the volume profile fits the historical then the algo will produce a VWAP fill price for the order and Carl is happy. No big deal right? Now is the important part. Have you ever heard that so and so stock is the darling of all the hedge funds?
How do you think that happens? It is not an accident. The hedge funds get ideas from their brokers. And the brokers are selling the same idea to every hedge fund.
Even if it is not their idea but they heard about it from another hedge fund they are gonna sell it to everyone they know. Which brings me back to you as a lowly day trader swinging or shares of Facebook around. If you get in front of one of these freight train stocks that all the hedge funds are trying to get into or out of, you can end up being a splat of blood on your screen if you are not aware of how this works and acting in a counter trend.
Have you noticed how volume is heavier at the beginning of the day and then can go crazy at the end of the day. The broker tells the fund it is running soft and then the fund says, ramp it up. More selling or buying. R2 is pushing price nicely down. On the left side in close proximity, there is not any anchoring point which can give support for the faling prices. Last MIDAS channel was anchored from the wrong bar in the indicator page so this is the one with correct anchoring.
When price comes back to channel wait for a bearish confirmation signal then go short. Indicators and Overlays Volume. Trading Ideas 6 Scripts From the creators of MultiCharts.
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