How Is A Weighted Average Different From A Regular Average VWAP & V-ROC – Future Day Trading

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VWAP & V-ROC – Future Day Trading

VWAP, also known as Volatility Rate, in simple terms is the average price of a security over a period of time, weighted by the volume of sales distribution for a certain period of time. Many traders, from institutional money managers to the average day trader, use the VWAP as a key indicator of overall order flow during the trading session. For institutional traders, they use the VWAP to estimate the best possible entry price; for example if the entry is below or above the VWAP at that time. If you buy shares, it is said that you enter the market at a low VWAP to get the best results. This is because many believe that if you buy shares, you will do so with volume.

VWAP is also a good way to get a sense of the market’s cash flows that day or week. One of the best ways to use this knowledge is to determine the type of market you are selling to; Is it a sensitive market? Once this question is answered, you can use the full potential of VWAP. In a choppy market you may want to consider going short, or buy/sell if the price moves away from the VWAP. If the market wants to consider buying low and selling high at VWAP.

The next indicator or tool that I find useful in my trading is V-ROC, also known as Volume Rate-of-Change. V-ROC is a great tool to help identify cyclical movements in the market. If the V-ROC is a positive number the volume is changing at an increasing speed, if the V-ROC is a negative number, the market volume is changing at a decreasing speed. How is this figure calculated? Yes, you need to divide the volume change of the last X period (day, week, month) by the volume of the past X period; resulting in a percentage change in volume, over the past X period (days, weeks and/or months).

Many investors will use a time frame of 15-30 days to give them a brief idea of ​​how the currency is doing in the market. This is especially helpful when trying to figure out if the rally or selling price is legitimate. To do this, look at the V-ROC and see if there is a discrepancy between the V-ROC and the actual price action; if there is a discrepancy in the V-ROC and price that may indicate a downturn or price movement in the near future. Another way I use the V-ROC is when trading around price support or resistance. The V-ROC, I find is very useful when the price is close to the level of support or resistance because as soon as the price breaks the support or resistance it helps to confirm the stop with the increase of the V-signal. ROC.

I must say that these two indicators are a great addition to both short and long term trading, and have also helped me in my overall interpretation of the market’s currency. I hope these tools help you guys as much as they have me. As always, follow these rules and good luck trading.

Sincerely,

School of Commerce.

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