What you mean by VWAP?
VWAP(Volume Weighted Average price) is the ratio of value of a stock traded in a certain time period to total volume traded at that stock for a particular stock. It is one of the best and commonly used intraday indicators in trading. In simple words we can say that VWAP is the cumulative average traded price of a stock with respect to Volume. The equation for VWAP is as follows,
VWAP= Cumulative Typical price of a stock*Volume/Cumulative Volume
This is not so important, in real Trading or making profits, I just mentioned them just to share how its calculated, and you need not go further into it. Lets focus on information that can be used in Real trading.
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| How to Use VWAP For Intraday Trading |
How to use VWAP For Intraday Trading?
Can Determine Bullishness of a stock
A bullish trend of a stock can be identified when the price of a stock is above VWAP. This means that the price is above average volume and that means positive trend. You can enter at stock in this particular condition on retracement to VWAP in the direction of the trend.
Can Determine a Bearish Trend of a stock
This is just opposite to the above mentioned condition. It can be confirmed or identified a stock in bearish when the price moves below the VWAP line. You can sell at the VWAP in the direction of the trend. You should use other confirmation too.
VWAP will act as a Resistance and Support for stocks in Intraday trading
When the price of a stocks moves above the VWAP line, it will act as a support and there will be a further upward or Bullish movement in that. Also if price below VWAP, then VWAP will act as a resistance for that stocks. So you can easily plan your entry and stop loss for intraday trading for that stock.
Bonus Tip
While following these conditions mentioned above for intraday trading , you shouldn't only depend on this indicator. You can add volume indicators and price action analysis to improve the accuracy or to get a better results. Look for the strong candle which cross VWAP when indicates that strong bullishness and vice versa.
Conclusion
VWAP is is used by most of the intraday traders which doesn't means its 100% accuracy. You can add this indicator only to improve your selection of stocks using your own trading strategies. You should backrest this one combined with own strategies and see results and then enter in to live market Trading
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