Thoughts on Day/Swing Trading

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poortrader

Well-Known Member
We expect gap up open in the first case and gap down open in the second case. This is so because afternoon session is determined by Europe and Dow futures....so we expect the trend to continue the next day open barring some unexpected reversal in US markets in the evening.You will see that 70 % of the time the gap will be in direction of the late afternoon trend and the late afternoon trend is generally durable..

Smart_trade
On VWAP
Dear ST
Let me briefly scribble my understanding here and tail them with a few queries.


1) First aspect of this theory is that we need trapped trader (bulls/bears)
2) That can happen only when there is a reversal esp all of a sudden , i.e trend reversal
3) And if turnaround is sharp and background is suitable like an important level is crossed then we can add positions or get in because on Break Out many will be getting in adding to the surge, which means the situation is compounded
4) Now if situation is not compounded we can go for 20+, if compounded we may get quick fire 30

5) Today at 2.55pm to 3pm there was difference of 35-40 points between VWAP and Nifty
6) When the market broke the high of 5158, there was new enthusiasm, and the market went off in the break out mode. The VWAP added, the squaring off added, closing of the positions on account of settlement added - to the bull run.

Questions
1) Would we carry Nifty knowing that it is at a premium of 50+ points
2) Do we check for Vwap only around last hour or is it equally effective in day time
3) Is there any other important point to note on an expiry day like today in case of rollover with this theory?

Thanx in Advance
 
Hi ST,
is there anyway we could have traded the high lighted area in the chart? The reason I am asking this question, it looks like the same scenario is repeating for every RBI policy release. Also I am not sure this is right thread this question and sorry if wrong. Thanks much

Nearly 75 points movement in 30 minutes. Same for the SBIN also.


Thanks
Bala
In such volatile environment one can catch the movement if one is very fast in taking trades and also reversing if necessary. Few of our trader friends caught this move on 1 or 3 min timeframe trading on price action. But if one is not a kind who can reverse without batting an eyelid......it is better to stay away from such moves as they can burn a hole in the account if one is not fast in reversing.

But after that huge candle, next candle was a red candle and one could go short below 10:40 low, and cover the short position above 11:35 high.Then long above 12:05 high ......and hold till the end . If we catch simple moves like this , there is no need to catch those acrobatic moves if you are a little slow and need time to think and react......enough money can be made trading simple moves.

Smart_trade
 
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On VWAP
Dear ST
Let me briefly scribble my understanding here and tail them with a few queries.


1) First aspect of this theory is that we need trapped trader (bulls/bears)
2) That can happen only when there is a reversal esp all of a sudden , i.e trend reversal
3) And if turnaround is sharp and background is suitable like an important level is crossed then we can add positions or get in because on Break Out many will be getting in adding to the surge, which means the situation is compounded
4) Now if situation is not compounded we can go for 20+, if compounded we may get quick fire 30

5) Today at 2.55pm to 3pm there was difference of 35-40 points between VWAP and Nifty
6) When the market broke the high of 5158, there was new enthusiasm, and the market went off in the break out mode. The VWAP added, the squaring off added, closing of the positions on account of settlement added - to the bull run.

Questions
1) Would we carry Nifty knowing that it is at a premium of 50+ points
2) Do we check for Vwap only around last hour or is it equally effective in day time
3) Is there any other important point to note on an expiry day like today in case of rollover with this theory?

Thanx in Advance
Good observations poortrader.

1) Carrying Nifty positions over 2 days holidays is indivisual call. I normally liquidate all my positions and I will enter again after our market opens for trading. I am confident that I will get into the trend again at a very good price and ride the trend.

2) VWAP climax comes in the last hour of trade because of forced short covering /bull liquidation. I know a few very large traders who continously monitor the current price and VWAP after every 30 min or so. But I found that market may criss cross over and below the VWAP but when the difference is large , it adds pressure on the loosing side.

3) Expiry day moves are fast and violent....one needs to be very fast in taking a reversal if the price action so warrants.

Smart_trade
 
My Best Wishes to all trader friends and their families for a Happy Deepavali and A very Happy and Prosperous New Samvat ( new year)......let everything you wish be yours in the new Samvat.

Smart_trade
 

mangup

Well-Known Member
Dear ST Da,

I have some query regarding VWAP,

1. What is a diff betn ATP(Avg Traded Price) & VWAP (Vol Weighted Avg Price)?
2. Which one is more significant?
3. Whether this strategy needs to be adopted for last 1-1.5 hrs for day traders & positional traders can carry the position after checking the day ending VWAP vs the then closing price(may be at 3:25 hrs).
4. what i have understand is -
a. If VWAP is more than Closing price & with a gap of more than 35-40 pts, then it means longs are trapped, will try to cover their longs near the end of the session or as per their SL or as per their risk appetite. This long covering will lead to supply & prices will decline to fill this gap of 35-40 pts apporx. Hence we need to take short position till this gap is filled. I have not understood if price will come down again will it not further increase the gap between VWAP & closing price?

Reverse is the case for shorts.

Kindly confirm what i understood above is correct.

5.Also kindly explain if this gap remains there till that day end, meaning those trapped longs have also carry forwarded their long trade to next day. Do we also have to carry forward our short trade that we have taken in anticipation of price will be declined, for next day?

6. Can we trade on this strategy throught the day. offcourse the trade will be initiated once we have a gap of 35-40 pts.
7. I read that there is no historical data available of VWAP that would have helped to monitor the trend of average gap which creates imbalance between the bulls & bears & lead price to move to equilibrium.

Regards,
Dear ST Da,

Pl reply.
 

sanju005ind

Investor, Option Writer
Thanks ST and all the others for enriching this thread. I sat on this weekend and studied the entire thread. Learned a lot. It is time to put everything into practice. Will keep you posted.
 
Dear ST Da,

I have some query regarding VWAP,

1. What is a diff betn ATP(Avg Traded Price) & VWAP (Vol Weighted Avg Price)?
2. Which one is more significant?
3. Whether this strategy needs to be adopted for last 1-1.5 hrs for day traders & positional traders can carry the position after checking the day ending VWAP vs the then closing price(may be at 3:25 hrs).
4. what i have understand is -
a. If VWAP is more than Closing price & with a gap of more than 35-40 pts, then it means longs are trapped, will try to cover their longs near the end of the session or as per their SL or as per their risk appetite. This long covering will lead to supply & prices will decline to fill this gap of 35-40 pts apporx. Hence we need to take short position till this gap is filled. I have not understood if price will come down again will it not further increase the gap between VWAP & closing price?

Reverse is the case for shorts.

Kindly confirm what i understood above is correct.

5.Also kindly explain if this gap remains there till that day end, meaning those trapped longs have also carry forwarded their long trade to next day. Do we also have to carry forward our short trade that we have taken in anticipation of price will be declined, for next day?

6. Can we trade on this strategy throught the day. offcourse the trade will be initiated once we have a gap of 35-40 pts.
7. I read that there is no historical data available of VWAP that would have helped to monitor the trend of average gap which creates imbalance between the bulls & bears & lead price to move to equilibrium.

Regards,
Dear mangup,

I am putting down my views in the same order as per your questions :

1) and 2) I guess there is no difference between ATP(Avg Traded Price) & VWAP (Vol Weighted Avg Price) , some front ends call it ATP and some call it VWAP.

3) Dont consider this as a trading strategy. I had give this as an observation which helps me to decide whether to hold my winning positions till the end ( and preferably add to them ) ....this is a way of finding out which side bulls or bears is loosing and which side is winning and which side is likely to panic and rum amuck in the end. Your positions should be taken on whatever methods one follows.

4) One has to understand the difference between the large gap between futures and cash nifty one sees in the current settlement period ( this gap is almost constant throughout the session)and the gap between weighted average and the futures because of the price swing in one direction. This gap is not constant throughout the session. If the current price of Nifty futures is less than its VWAP by 35-40 points in the last 1 hour , then that means that the bulls are trapped and they will come for liquidating their loosing long positions and this will drive the prices lower and the gap to get wider.......

5) Some longs may decide to carry their loosing positions to the next day but the leveraged day trading long positions will try to go flat at the end of the day. Also the excessive positions taken with the brokerages will be compulsorily squared off between 3:00 to 3:15 and that puts further pressure on the market.

6) One can trade this strategy anytime in the day when the difference becomes 35-40 points...but the strong effect will result into a fast and furious move only in the last 1 hour as the day end nears.....we can square off our daytrading positions in profit when there is atmost panic in the bulls camp....that is when we get the lowest rates to take our profits.

7) There is no historical data available...so you have to test these in real time when action is actually happening.

Hope I have answered all your questions....:)

Smart_trade
 

murthyavr

Well-Known Member
...

7) There is no historical data available...so you have to test these in real time when action is actually happening.


...
Dear ST,

Historical data of VWAP is no problem, as long as we have Closing Prices (C) and Volume figures
on hand. VWAP is only a derivative of Volume and Price..

Here, I made one simple AFL, which shows the difference between C and VWAP (C-VWAP) in the
chosen TF as a Histogram. Only requirement is that one should have the Volume figures captured.

(The premise for this AFL is 1-min data; Typical/Average price taken as (H+L+C)/3 of the 1-min candle)

Now, basing on this AFL, will it be possible to derive a tradeable strategy (on an experimental basis)?

Any such thing coming out from you would be great !!!

Any AFL, as such is not a great thing, but any strategy derived out of it, is!
(I am only capable of writing this AFL, but you have the capability to come out with a strategy..)
 
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