VWAP strategies for profits in Stock Markets!!

VWAP strategies for profits in Stock Markets!!

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hello hello hello my dear friends this is your  friend vivek bajaj co-founder of stock edge   and inland markets friends yet another to face  global and yet another super excited video i'm   going to touch a very very important topic today  multi-time frame analysis and with me i have the   master of multi-time frame analysis you're going  to enjoy this video this learning please watch it   till the end i mean it takes an effort to reach  out to the right people and get them on board for   your learning this is going to be very exciting  learning we are going to discuss multi-time frame   we are going to discuss a very important indicator  which the expert is using so hold on this is great   and if you have joined me for the first time face  to face is a series which i run it has more than   45 million views and if you have not become part  of face to face do subscribe to the channel elon   markets well without spending too much time on  this let me welcome dear friend brian shanahan   hi brian hi vivek thanks for having me on here  good morning from india and good evening from u.s   did i spell your name correctly uh brian  sanon shannon shannon okay thank you so   much for correcting me there so it's great  to connect with you and uh you know i know   uh you're very active on twitter and we got  connected to twitter that's the power of twitter   you know you can reach to anyone at any uh you  know within any objective and uh i know about you   so let me just introduce uh people um to you uh  sorry let me just introduce you to people see i'm   already nervous but i'll try to cool keep my cool  and calm uh so let me introduce a brian shannon   is an american author and technical analyst he  published his book called technical analysis using   multi-time frame in 2008. he's an avid educator  he's a market participant he's a trader and you   know he's the one of the best indie traders  in the business that's what people call him   so you know this is a short introduction from  my side but obviously we want to hear more from   you brian how did you start this journey what has  been your background please tell us more about you   yeah sure i i first got my interest in  the uh markets um uh through my dad he   he would watch uh wall street week here in the us  which i'm not sure if you guys are familiar with   um and when i was a teen and you know 12 13 years  old i would sit there on friday nights and watch   this uh market show with them and i started  picking up little things about the market and   asking questions and then finally did a trade uh  you know my first equities trade i think was 15   i had put up 500. my dad loaned me 4500 basically  10 to 1 margin um and we bought a thousand shares   of a five dollar stock that stock doubled in the  next three months and needless to say i was hooked   on it i thought you know why do people get jobs  why would anyone work when you can make money   like this especially at that age so that was uh  you know i graduated college in 1991 from there   i went to uh lehman brothers in boston and uh  worked as a stock broker for a little bit moved   to denver colorado uh in 91 as well 92 actually  and i've been here since and you know during that   time i was a broker for a retail firm for a little  while i like to say i've got the opportunity to   practice with other people's money and you know  i did make mistakes with other people's money but   it wasn't you know big mistakes or anything like  that but i i definitely learned a respect for risk   and you know after about a year or so of being  a broker at that firm i branched out you know   basically graduated from a a salesman which a  stock broker is basically uh to a trader i you   know found a firm that gave me leverage and i used  uh you know every last penny that i had saved and   you know went to work for for this firm trading  it was uh i think i was 23 years old and man i   if i if i had to do it again the way i did it back  then today i don't think i would meaning that you   know i was young and i could afford to take risks  i had nothing to lose basically um so you know i   i would i did have a strong respect for risk so i  was immediately profitable and profitable each of   the months that i was with that uh proprietary  trading firm out of new york i opened an office   for them in denver and then opened my own day  trading office so this was you know 1993-94 and then kind of started with another  firm where i headed up their pri prop   desk some educational content i still i you know  i still have traded pretty much every single day   since then so you know really my passion for the  market comes from my day-to-day activity in the   markets so here i am today you know as you said i  wrote my book in 2008 i'm working on another one   based on you know the anchored volume weighted  average price and uh i run a site called alpha   trends the best way to find my information  where i put out you know my public stuff   is on uh twitter where my handle is uh alpha  trend so that kind of gets us up to speed here   yeah yeah absolutely yeah so you know brian um  so you said that you graduated in 1991 so how   old you are i'm 54 years old oh my goodness okay  let me ask you this question do you think fitness   has anything to do with success in stock market  i do yeah and i you know i i try to stay healthy   and active and uh um you know i think i think you  you know you hear the phrase healthy body you know   healthy mind healthy body and you know they feed  each other and you know if when you you maintain   physical fitness you sleep well your brain  is rested you can engage in you know a pretty   stressful activity and where you always have to  be thinking especially on the time frames that   i'm engaged on i i'm a swing trader primarily so  i i ideally like to hold stocks you know a couple   days to a couple weeks but you know it's up to  the market it's not up to me how long i i hold if   i decide how to long to hold it's probably going  to be a loser you know in other words if i'm not   listening to the market especially now with all  the volatility that we're seeing in the markets   um that you know i've got to listen to the  message of the market and right now you know   today being what's the 24th of january we had an  extremely volatile market in the u.s market and i   did nothing but day trades today simply because  that was the opportunity there i didn't i don't   necessarily want to be a day trader but you know i  i'm here in front of the machine this is what i do   and that's where the opportunity is again i have  to listen to the market i don't i can't you know   tell the market what i want it's not going to  listen to me true and one more question is that   if you look back your your career your life  would you like to change anything there   you know i i get asked that from time to time and  you know i could say well i wish i did this or i   wish i did that but you know where i am today  is it it's it's based on all the mistakes i've   made it's based on all the successes i've i've had  i'm really not one to look back and regret and do   uh shoulda coulda woulda type stuff i'm where  i am today because i went through the school   of hard knocks now maybe i could have done things  slightly differently i i honestly don't know what   those things would have been because you know i i  learned by doing um my biggest mistakes have been   my best lessons yeah and without you know i could  say i wish i didn't lose that much money that one   day or that one month but it's me it makes me who  i am so i i really don't think about it that way   i think about here's where i am let's engage with  the cumulative knowledge i have and try to be as   best as i as i can be here today sure sure um  you know the last question before we go to the   conceptual discussion is that you know there are  a lot of youngsters who have come into the market   and uh immediately after graduation  they have just gone into the market okay   uh and you worked in some reputation firms  before you actually came into the market full   time for example you worked in goldman you just  mentioned do you think that experience of working   in a large firm shaped your career to to take  a better decision to do on your own or let me   put it the other way do you think a youngster  should not get into the market from day one   maybe work somewhere for some time get that right  experience and then get into the market full time   i i think you're better off you know not getting  into the market full-time right away because   you're going to be there making a lot of  mistakes not learning from your mistakes rather   than getting some guidance from some structured  program whether it be you know go get your cmt   uh you know for instance or go work  for an investment bank under a trade   another trader try to figure out different  areas in the market and maybe trading is not   the right you know route for for for someone out  there maybe they're better off as an investment   banker maybe they're better off as a broker or  going into mortgages or selling insurance you   don't know until you try a few things out you know  and when i was starting out as a retail broker you   know my my manager at the time said you have to  get your insurance license and i was like i don't   want my insurance license i'm not gonna i'm not  gonna pass that i'm not doing it but i did pass it   i learned some good things and i was stubborn but  you know it gave me the experience to see things   differently see things through a different lens  if you can work especially if you can you know   find a way to go work for a big fund and figure  out how the big money really moves but money and   markets around uh and then figure out how to  you know look at different time frames and   that's the key you know it's not just what area  the market can be in one of the most important   things is time frame and knowing your time frame  that we can be in a bull market on one time frame   but begin the snot kicked out of us on a shorter  term time frame where you're just losing money day   after day and people will say hey but we're in a  bull market but your time frame is you know you're   leveraged up and you know making all the mistakes  that young people make um so go you know go get a   job somewhere else look you know get a salary get  some benefits learn some things swirl your money   away do some trading on the side and then progress  to being a full-time trader sure that's pretty   fair advice uh so brian uh i have i'm blessed that  today is the day when market was very volatile   and you actually traded from swing to day to day  so you know if i can also get some input from you   that how do you trade in these kind of a market  using the methodology which you will share with us   so can we just start the discussion on the concept  yeah so basically the you know the markets as we   know are fractal and and for people that don't  understand what that means it it basically means   if you take your analysis on a weekly chart and  look at the you know the trends that they're in   you could take that same chart not know that it's  you i could tell you that it's constructed of   monthly bars or candles but it might actually  be constructed of one-minute bars or candles   and you honestly wouldn't know the difference  a lot of the time so the the point of you know   fractal is that the patterns repeat on different  time frames which is great because that's what   makes technical analysis transferable from longer  term investing to swing trading to day trading   once you learn the concepts of trends how they're  formed how they develop how they're sustained   where to manage risk underneath successive higher  lows in the lungs or above lower highs it doesn't   matter what time frame you're on you can you  know use those same principles on any time frame   and those are you know looking at multi-time frame  analysis um looking at you know basic tools price   volume and again multi time frame so the three  of those are the basis of the volume weighted   average price price only price pays volume tells  us the intensity of the market moves and time so   today we saw the biggest volume in probably a year  in the s p 500 we were down a whole bunch in the   morning we rallied back and closed right near  the highs so it seems as though it's you know a   near-term turning point to measure risk against  and it's always about risk management true true   so let's get it going so i guess you will share  the screen and let's uh let's go through the   concept you have made a lovely presentation for us  so first of all thank you for that okay we're good   yeah we are good to go okay so we're gonna focus  a lot on you know the anchored volume weighted   average price and one of the biggest questions i  get is where do you anchor from um and we'll get   to that but first you know before we cover any of  this the the first thing you have to understand is   basic market structure and this is something  that i learned from stan weinstein it's also   you know been written about by uh wyckoff and a  guy named joe kerr back in the early 20s but what   it does is it breaks down the market cycle into  four stages the accumulation stage is kind of   where it's been in a previous uptrend and it's  broken down and gone sideways and you know there's   a phrase during these you know if they don't  scare you out on the way down they'll typically   wear you out it's the process of lit ritting  the sellers and the buyers regaining control   it's basically a period of neutral market you  know that that i don't want to be involved in as   a trend trader instead i want to focus on  for long's the stage 2 uptrend if we're in   an uptrend well then we're innocent until proven  guilty meaning that you know we expect you know   that based on you know charles dow and the  tenets of technical analysis one of them is   a trend once established is more likely to  continue than reverse so i i don't want to   buy after the you know five day you know surge but  i want to anticipate the little moves after you   know a three to four day pullback and use multiple  time frames so that's what this chart is showing   here on the left is if we took this little boxed  in area during this stage two and we said abcd you   know if it's pulling back on the short term time  frame we don't want to get involved and actually   put an example in here with one of your indian  stocks and i will forgive me i've never looked at   an indian stock in my life just because i you know  i i'm us-based i trade u.s stocks but they're the   concepts even there you know i i we we can look at  some live ones and they're they're going to be the   same exact concepts stage three occurs after the  markup we have a chance where the market starts to   turn sideways and we certainly saw that you know  first as the russell 2000 s p 500 and now we're in   a stage four decline in a lot of these markets  guilty until proven innocent so what we want   to do is come up with a plan of action for each  one of these stages so in the accumulation stage   one where it's kind of going sideways we're going  to anticipate where to participate in a new long   or we're going to cover our short because it's  no longer going down instead it's turned sideways   there's no longer an advantage to being short  stage two that's where we participate on the   long side and we want to avoid shorting now we can  make money shorting stocks that are in up trends   but the simple math of higher highs and  higher lows means the sum of the rallies   is greater than the sum of the declines so there's  naturally more opportunity to trade the long side   and avoid the little pullbacks some people like to  you know short the little pullbacks and if you can   make money like that consistently that's what you  should do and that you know that's one of the keys   is as i you know that you know people have to find  out what is their time frame what is the market   they trade are they commodity traders u.s stock  traders crypto traders solely indian stocks it  

doesn't matter you've got to do what works for you  don't listen to other people and say you've got to   do this or that stage 3 you know the the uptrend  is kind of exhausted itself you're going to start   getting stopped out of your long trades and you're  gonna start to say hey it looks like it has the   potential to break down so in the u.s market we  saw all these big leaders peloton uh you know zoom   we saw roku square paypal they were all breaking  down prior to the index so we were seeing you know   weakness under the surface and finally the index  gave it up basically about a week and a half ago   so we want to anticipate where the other short  opportunities and then in a stage four decline   that's where we participate on the short side  and avoid the long side again we can make money   trading those bounces and sometimes they can be  you know some of the most spectacular bounces   there are or you know spectacular short-term  rallies occur in a downtrending market so if   you're nimble and you can day trade for instance  like i said you know i was day trading today   we you know we did finish positive we were down  most of the day so we want to you know anticipate   the moves so we're not chasing things participate  when we have price confirmation exit when the   market tells us to and then avoid it so here's  here's an example of uh larson and toubro yep   okay so this is i guess one of the nifty 50  stocks and you know on the left we see here's   a daily time frame it's clearly in an uptrend  you this green line is the 50-day moving average   it's innocent until proven guilty  with a rising 50-day moving average   there are pullbacks in here and certainly you  can make money shorting those but the sum of   the rallies you know it goes from 1720 to 2000  back down to eight you know 1760. the sum of the   rallies is greater than the sum of the declines  so this highlighted area here is simply this chart   on the right so we're magnifying it to 30 minute  candles and i don't even know if that's the proper   uh amount of time for the indian market i don't  know if those are equal if there are 30 minute   increments that are equal like here in the u.s but  this is how i do my analysis it's pretty much okay  

it's pretty much valid for india as well oh okay  good good to know so you know in this period right   here just to this side you can see we had you  know two down days and then we have this kind   of sideways it breaks a higher high here so we're  anticipating you know we're avoiding this little   pullback right here we're anticipating in here and  then as it breaks higher we want to participate   and as long as making higher highs and higher  lows on the shorter term time frame then we   want to stay with that trend and raise our stops  up underneath these successive higher lows when   it makes a lower low well then we exit that's it  the definition of trend is no longer valid for the   time frame we're engaged in so there's no reason  to be involved any longer so in there you can   see that exit occurred you know it didn't occur  at the high only the liars exit up there right   um so we want to participate you know in here  we don't want to try to buy the low we in other   words we don't want to buy pullbacks we want to  buy strength after the pullback and then we want   to exit as the trend gets tired and starts to make  that first lower low it's got this high it's got a   lower high than a lower low so as it breaks down  yes of course you can short this and make money   but because it's in a primary stage two uptrend  i look at and say i'd rather wait it out wait   for it to undergo accumulation again and have  the trends aligned at this point right here   the trends are aligned the daily time frames  is an uptrend in this 30 minute time frame   is an uptrend that means i have the maximum  you know i have i have momentum in my favor   i ha i'm getting in at the beginning of this  unfolding move i don't know how far it will go but   you know if it's truly an uptrend it's gonna at  least you know take out this prior high which of   course it did and you know then manage risk and  again you can make money shorting here but my   philosophy is i want to look for trend alignment  and i personally avoid these because they can go   against you really strong and if you're going to  short them you know i like to say do it with half   a risk unit if your normal risk unit is a thousand  dollars you know when trends are aligned only risk   five hundred dollars you know based on where your  stop is and that's the way you know i like to look   at you know first market structure and then start  to add the tools sure brian uh this uh one day   and half an hour is it your standard template or  you uh you keep on changing it depending upon the   instrument or market condition or anything yeah  well on my screen so i've got several screens   of course um i've been doing this 31 years and  i've you know started adding more and more stuff   my analysis remains really simple but i like to  have the extra real estate so on my screen i have   a weekly chart up here then i have a daily  a 65 minute 30 minute 15 minute and a two   minute so when i click on a symbol it populates  all of those at once so i'm instantly aware of   you know the really big picture on the weekly  time frame the daily time frame and that doesn't   really get a lot of weight in my decision for  a swing trade but i still want to be aware   what are the key levels on the bigger time frames  am i pressing my shorts too too far because we're   coming into this bigger level where am i you know  pressing my lungs too much because we're coming   into this prior big level of support which has the  potential to become resistance so it's it's my my   main time frames i guess vivek you could say would  be a daily time frame is where i like to identify   what my opportunity is and then i will look at a  65 minute or 30 minute so in the us we're open for   six and a half hours a day that's 390 minutes so  i want something that's equally divided into 390.   so a 65 minute time frame there are six equal  candles if i used an hourly chart it would be   from 9 30 to 10 a.m eastern is would be one candle  and then 10 to 11 11 to 12 so i'd have one 30   minute candle in six six sixty minute candles so  the way around that is to make 65 minute candles   there's six of those that are equal or there are  13 30 minute candles 26 15 minute candles 39 10   minute candles etc so that's where i you know the  the 30 minute and 65 minute i kind of look to see   what's my risk reward is there's sufficient  reward potential here for my perceived risk   and then the shorter term time frames down  into that five minute and two minute area   that's where i really like to fine-tune my entries  look at the daily volume weighted average price   maybe yesterday's volume weighted average price  and really fine-tune my entry so i can get in   just as the momentum is beginning on the shortest  time frame and hopefully it will become aligned   with the bigger picture and that gives me a  head start on most other people who are waiting   for breakouts waiting for volume to come in  to me it's price based first i'm aware of   the volume patterns and i want to see you know  volume expand on the way up peak at the turning   point diminish on the retracement and then  as it starts to rally again when i'm buying   the volume isn't there yet the volume comes in  an hour three you know three hours a day later   often in you know i'm i'm trading liquid stocks to  begin with but i'm saying the expansion of volume   where people who've been waiting for volume  i might get involved in a 30 dollar stock   and they're getting involved at 3120 because  that's when they start to see the volume   by that point i'm taking a third off and saying  go ahead here's your breakout there's your volume   take some from me so it's it's always about  anticipating and risk management i want to   take that first third off even though i think it  might be able to go to 35 38 dollars per share i'm   going to sell some at 3120 or whatever the number  might be because i want to reduce my risk on the   first part maybe raise my stop to break even now  i've taken all the risk out and you know that's   really the key is risk management sure so can i  safely assume that uh you try to enter in the uh   towards the end of the stage one uh with the lower  time frame so that you are literally the initial   ones to enter the stock yeah it's actually just  at the very beginning of that stage two on the   shorter term time frame and you know i i've gone  in at certain times where i've seen that level   where it's it's had resistance the last two and a  half days at 31 you know 31 dollars or 30 dollars   per share so i'll go in there and it'll i'll  look at my you know i'll set an alert at 29.90   i'll put it in a level two screen i'll start  watching it if i start seeing a little bit   of volume or you know i i see the the offer is  disappearing you know and it just seems like the   frenzy is about to build for this breakout i'll go  in at 29.95 and i'll put in a uh a limit order for  

for 5 000 shares at 30 and 10 cents  if i see you know 1800 shares offered   i'll clear the book and create that momentum  and then if i get filled on you know eighteen   hundred shares then i've got thirty two hundred  shares bid at thirty dollars and ten cents   that'll induce other people to either join the  bid or cut in front of me or go take the offer   so i'm trying to help nudge it at that point as  well now i don't do that all the time and you   really need a a good healthy market to do that  yeah and gotta you you've got to have confidence   in what you're doing and you know position  of strength for the week and for the month so   you know i don't want to give the impression that  i'm out there moving stocks yeah but but sometimes   i'll try to you know provide that catalyst as  well sure got your point yeah please continue   okay so what we're going to mainly talk about is  the volume weighted average price and this is the   scales of justice and you know the the the ladies  you know the the scale i don't know what they call   her i should know this um is blind to all evidence  he just seeks the truth so what we're talking   about in the market of course is supply and demand  and what we're looking for is the equilibrium   points and the points where that comes out of  balance and then we you know in in the volume   weighted average price allows us to objectively  do that we are basically looking at this market   with blinders in terms of support and resistance  and you know who has control the buyers or sellers   so number one price is the truth it's the final  arbiter people argue all day long on twitter or   whatever about no you're not right about that  chart or you know you drew that trendline wrong   i really don't care i'm you know i i'm not  i i never debate people about a stock and   you know i've been doing it long enough i have  faith in my system that i know where my stop is if   you don't agree with me go short it and i'll buy  it from you don't argue with me about it i'm not   you know this is an academic exercise  we're not competing for a phd degree   we're trying to make money so if you think it's  that i'm wrong go take the other side of the trade   because price is truth and it settles all of those  arguments and i'll know i'll get out if i'm wrong   i've been wrong a lot i'll continue to be wrong  a lot but i will protect myself and get out   yeah what we're talking about are the laws of  supply and demand they call them laws because they   are truths they are not the theory of supply and  demand they are actual truths of supply and demand   and that's what the volume weighted average price  really measures without any doubt at all it tells   you definitively from any point where we start  a v web who's in control the buyers or sellers   so it's really the most objective measurement you  can find and i i will challenge anyone to show   me something otherwise but it doesn't exist so we  want to be aware of where is the stock in relation   to the volume weighted average price what's the  direction of the volume weighted average price and   of course we're always looking at multiple time  frames we don't want to fight the bigger trend   because we see a short-term you know opportunity  if we do see that short-term opportunity it's   against the primary trend again smaller risk  units to compensate for the fact that you're   not trading with the primary trend so the way i  look at the volume weighted average price levels   people always say hey is that you know do you buy  pullbacks to the 50-day moving average just just   as an example to to talk about the psychology the  the 50-day moving average often acts as support   the reason it often acts as support is because  we have so many people trained to look at it   who have been taught that it is support so they  stop shorting as it gets down to the 50-day moving   average they might start to cover some of their  you know maybe it was two standard deviations   above the 50-day moving average so some big hedge  fund shorts 100 000 shares and they cover it   down at the 50-day moving average um they you  know they stop selling they start buying back   and then what is sideline cash to do we've got a  mutual fund with 5 million shares it ran from 30   to 35 they sold uh what i said they have 5 million  shares they sold 200 000 shares on the way up   250 000 shares it pulls back to the 50-day moving  average they'll stick in a bid for 50 000 shares   because they want to protect the rest of their you  know four and a half million shares they have left   and stick in a bid to induce other traders to  come in and say hey look at that big bid there's   buyers there so we have lack of supply we have  more demand from the shorts covering from the   institution trying to protect their position and  then you have sideline cash saying hey it's at   the 50-day moving average the 50-day moving  average usually acts as support i'm going to   stick in a bid and lo and behold that's why we  see the 58 moving average or a 61.8 retracement   or a volume weighted average price or whatever  technical tool you know trend line often becomes   supporter resistance because there's enough people  coming to that same conclusion in the same spot   so if we have a 50-day moving average lined up  with the volume weighted average price since   the beginning of the year and a 61.8 percent  retracement you know let's just say we have   all these three things coming together maybe we  have the fibonacci group all coming to the same   conclusion based on hey i'm going to stop selling  short i'm going to start buying back you know in   in we have they become stronger when there's a  confluence of indicators so the way the way i   look at it is again we identify that key level on  the bigger time frame and to me that's the daily   time frame and then we look for evidence that the  buyers are actually gaining control we don't just   stick in bids blindly hoping that it's going to  occur we don't have to buy 300 000 shares we're   looking to buy you know maybe 500 shares maybe 5  000 shares maybe 10 000 shares you don't have to   do the dirty work of creating the support let the  institutions do that so to me it's a place to say   it's a level of interest let's look at shorter  term time frames one question right so you know   bran all these standard indicators like 20 50 100  200 these are these have been used for many years   and you know what i'm seeing that uh the algos  they have been mapped to these indicators   and because algos have also this character of  uh fooling people so they will typically take   the price just below the 50 period moving average  and reverse it from there so what i am getting a   sense after of your discussion is and please  correct me if i'm wrong that only one number   may not be a perfect conclusion maybe a  convergence of viva 50 period moving average and   certain more indicators and if you have a range  that okay the demand zone is around 30 to 30.5   that's the range typically one should accept as  a demand zone rather than one particular price   point am i right or wrong oh you're absolutely  right and you know to me it's a bonus when you   see a confluence of indicators i was just trying  to create the psychology of how each of those   groups might come to the same conclusion in that  same area right and then what we do is we say okay   we've got this level the 50-day moving average let  the other people let the uneducated people stick   it in at 30.08 right because that's the number but  we have the predatory algorithms as well as what   you're talking about who are you and these are  designed to go into these widely watched areas   run stops flush them out and then jack it  right back higher from failed moves comes   fast moves often in the opposite direction you  know those those bare traps those little shakeouts   so again they're a level of interest and what  that means is you know people say hey it's at   the 50-day moving average that's support we don't  know that until it runs away from the 50-day   moving average it runs from 30 50 up to 32 then  we can look back and say hey look at that wasn't   that awesome the 50-day moving average was support  yeah well the next time it's not going to be it's   going to go through that and it's going to drop  15 20 percent and people are going to say what   happened the 50-day moving average you know it's  it's support but it didn't work the market's rate   look at it as a level of interest and what that  simply means is look to the shorter term time   frames and look for evidence that the buyers are  gaining control and as it comes down after a five   day decline it probably takes a day to two and  a half days of trading back and forth in that   band that you said thirty dollars and thirty  dollars to thirty fifty and if it comes up to   thirty forty eight one day thirty forty seven  then thirty fifty two two and a half days later   that's where i want to buy i want to buy a  30-52 and maybe the low the first time was 29.95   then 20 30 and 12 cents maybe i'll stick my bit  my my stop at 30 and 10 cents a couple pennies   below that most recent relevant high or low so  i so in the short term i have that higher high   and i want to set my stop under the most recent  relevant high or low because if i have a higher   high to me it says now the short-term time frame  is looking like a budding uptrend yeah i have   my higher high what would what would break this  emerging definition of uptrend well if it made a   lower low so if my most recent relevant higher low  was it what did i say 30 dollars and 12 cents if   it breaks below that well then i want to get out  of the stock cut my loss i can always get back in   but maybe it drops down to 28 27 26 etc sure sure  go to the point yeah so it's it's multiple time   frame align you know analysis and trend alignment  let me uh do this so again as i mentioned earlier   price volume and time that's the components of  the volume weighted average price time is the   most subjective because we all have different time  frames i'm a swing trader some people listening   might be investors some people might be scalpers  which you know they're trading off 30-second   charts let's say whatever it is that's your time  frame it's not a bad time frame you can't feel bad   let other people say oh you shouldn't do this  or do that you do whatever works for you so what   we want to do is say who's in control the buyers  or the sellers or do we have this equilibrium so   when the demand is greater than supply obviously  what happens prices move higher that's a stage two   uptrend when we have sideways action it's either  after a rally and it starts to turn sideways   possibly distribution that bleeds to a decline  or after a decline it accumulates and then leads   to an uptrend when supply is greater than demand  prices move lower to find enough demand to support   the prices so when we look at a volume weighted  average price and here this is you know just one   day and these are i think one minute candles  here this market gapped up this particular   day so you anchor a volume weighted average  price from the very first minute of the day   market rallies up pulls back finds buyers who are  defending that volume weighted average price level   has another rally stays above that v web stays  above it crosses back and forth now we're kind   of in this equilibrium level it's gone sideways  you know if it broke back above this 360 550   it would have been a continuation instead it broke  down through this little support in the v web and   then the sellers took control we had lower highs  and lower lows so for a shorter term day trader   you know there's a great opportunity here you  know let's say we just shorted it right here   as this little rally or let's say even right here  at 360 355 let's call it you know with our stop   just above this little lower high that's a great  little day trade on these two minute candles   on a bullish time frame what we want to see a a  you know here's a one minute time frame a bullish   chart will tend to find buyers at the rising  volume weighted average price so if the market is   above a rising volume weighted average price for  the session i don't want to short it you know some   people will try to short it up here and cover for  12 cents i'd rather look for it and say i want to   buy it as it's breaking this range here you know  this tight range buy it right here with a stop   worst case under here maybe even under this little  low from a very short-term standpoint and again   the fractal nature of the market says this  could be weekly candles right here there's   no difference in the analysis the opposite  of true of course on the on the short side   sure so why is it called anchored uh volume  weighted average price what are we on here   good question so the traditional volume weighted  average price the one that we hear about the v   app is for one day the volume weighted average  price is you know was a benchmark for institutions   to say how well is my order executed i i  run a hedge fund and i give goldman sachs in   order to buy two hundred thousand to sell two  hundred thousand shares of this stock here uh   it you know closed the prior day at 177. so  i want to know how well did they do for me  

if if the volume weighted average price at the  end of the day is 170 80 it means the average   price based on volume every single transaction you  take the average price and divide it by the volume   the average price it traded at was you  know the the arithmetic mean is 170.95 if   they came back to me and said hey we sold  your order 166.50 or 168.50 i'd be like man   you know that's two dollars below the v web you  guys what are you doing you you screwed me over   but if they you know let's say they executed  the bulk of the order up in here in the morning   because they knew that it was going to be you  know a lot of pressure or they anticipated   that and they came back to me and said hey we  filled your order 170 85. 71.85 i'd be like   you guys are great i'm coming back and giving  you business in the past though before the volume   weighted average price became a benchmark  in 1988 uh it you know an institution had   no way of knowing if they were getting robbed by  their broker which they probably were back then   before we had this transparency so that's why  the v app was invented the anchored volume   weighted average price is when we set it from  any point other than the beginning of the day   so we can anchor at the 10 15 low of the day and  we can set our anchor at that 10 15 low it comes   down starts rallying up we say that looks  like a high volume event at 10 15 a.m i'm  

going to anchor a v web from there and see if the  buyers can maintain troll from that point forward   and then it rallies up makes a high at 1 15  p.m and backs off you know a half a percent   i know that was an important high i'll anchor  a v-wap to that and again i'll do that on daily   charts i'll do that on weekly charts i'll do  it on you know 30 minute time frames so the   the anchoring bias is you know something that  it's called a heuristic it's uh you know it's   it's that our decisions are based on you know our  anchor point in our mind so for instance the price   we pay for a stock we're anchored to that that's  how we determine success or failure in the market   if i pay thirty 30 and 52 cents and the stock goes  to 33 i know that compared to my cost that's the   most important price what i paid if instead it's  down at 29 well then i know i'm not doing a great   job so i'm anchored to that we're all anchored to  a certain you know price so price has memory it   wiggles into our brain and you know gets  stuck there so it's how we measure our success   the way to really think about it you know the  the volume weighted average price is dollar   cost average basically it's the same thing  if you took a thousand dollars each month   and invested in an apple in this case  you know the stock is trading between 225   and 197 when i put this together so in the  very first month you bought five five shares   at a cost of 199.23 that was your thousand dollars  well the next month the stock dropped to 190   so it was down nine points so we were able to  buy 5.2 shares when the stock was up at 235  

we bought 4.25 shares so at the end of this what  we want to say is here's our volume weighted   average price our average price was 206.60  that's our cost basis that's our v web   our volume weighted average price that's the  way to think about it it makes a lot more   sense when people think about it instead of an  institution buying 500 000 shares or whatever so   we're anchored to that we want to know you  know some of the guidelines very similar to   a traditional time-based moving average this is  a cumulative average the volume weighted average   price takes it from one point forward in in you  know ads and adds up all the volume divide it   adds up all the prices times the number of shares  divided by the volume so we want to be aware just   like a 50-day moving average is it rising if it's  rising it means generally we give the benefit of   the doubt to the buyers if it's declining we give  the benefit of doubt to the sellers if it's flat   and the prices are going back and forth above and  below it a lot of people will say well that volume   weighted average price is useless brian it's  just going back and forth above and below it   that's the beauty of it that that's the value  right there it tells us there's no trend here   stay away from it wait for it to break the  resistance by that break of the resistance   set your stop and see if a new trend emerges it's  an alignment with that longer term time frame so   there's value in recognizing those neutral  periods because it says stay away don't try   to force the trade when nothing's happening  so is it above or below the v web what's the   direction of the volume weighted average price  so what we want to know is where to anchor from   this was a period with you know back in the  fourth quarter of last year for the nasdaq and   it could be any period you know any time i always  anchor from the beginning of the day i from the   beginning of the week so this was a monday that  monday you know prices sold off and then the   next day they got back above the volume weighted  average price for the week so at that point it was   you know one day plus one 30 minute candle here  so it's not a five day volume weighted average   price not it's only a five day volume weighted  average price at the end of the week instead it's   the week to date volume weighted average price  and you can see how the buyers defended that   and they defended it the next monday morning and  then that next tuesday the sellers took control   and they maintained control on rallies up to the  volume weighted average price from that monday and   into the next week they did and then we got back  up above that volume weighted average price so   this looks more confusing than it actually is  because i added three of them at the same time   but i'm trying to paint a picture of how they come  together and perhaps i'm doing it in the wrong   order this was some something i put on uh on  twitter so i put a lot of these on twitter   and then follow up with and say you know here's  the volume weighted average price from the peak   amd had this really big rally that you  can't see because i didn't include that here   but this was the peak and we knew that that  was the peak when it broke down basically   let's say right here because we had a lower high  and then a lower low at that point so once we   have that lower high and lower low we anchor a  v-wap off of that peak and say let's see how it   progresses from this point forward and you can see  three four days later rallied up to that volume   weighted average price from the peak sellers were  there waiting and they knocked it back down and   they knocked it back down again over here but then  we saw at the same time when it made this lower   low it then rallied up and broke these highs and  it looked like okay this is a higher high still   below that v web but this is a higher high and  that's a an important low so let's anchor a v whap   off of that so it rallies up it gets back above  the volume weighted average price from the peak   it was extended on a gap so we anchor one off of  that now the range is really tightening in here   and i was looking for this as a potential  trade above this peak right here to buy along   if it had gotten above that level i was planning  on going long with a stop under this low sure   maybe even that low because that's the most recent  relevant high or low we saw that there were buyers   defending this volume weighted average price so  if it got above here and then failed to continue   higher i would want to sell as it breaks back down  instead what happened it broke down so you know   we didn't take so there was no trade so we  anticipate during these tighty consolidations of   and we wait for price confirmation it's it's very  tempting to buy in here because hey they've got   good earnings the analyst said this these guys on  tv said that but until it confirms price wise that   it's made a high or high it's only a candidate  for trading it's not so we want to you know   wait until we have that price confirmation this  is something i like to tweet when the market's   in a downtrend i tweeted it last monday saying  don't buy the dip buy strength after the dip um   but what we see is you know so here's you know for  instance starbucks starbucks is in this downtrend   and basically at this point right in here  maybe you know late february early march   we knew that it was making lower highs and lower  lows so we anchor a v-wap off that peak and people   say hey starbucks is a good company i'm going to  buy it at 75. that's in a downtrend help yourself  

i want to see it back above this volume weighted  average price i want to know that the average   participant from this point is now making money  on the long side i want to know the average short   is losing money and that's what it's really  telling us so it continues lower lower lower   all the way down to 50 bucks per share so the  people bought at 75 thinking was down too much   they lost 35 you know 33 percent just a week and a  half later in a so-called quality name instead you   know don't buy the dip it rallies up it makes a  higher low and then it breaks that volume weighted   average price by strength after the dip that's  where we want to buy that's where the buyers   the average participant long from here is making  money at that point the average short is losing   money so the buyers are back in control we can  buy here with a stop under whatever high or low   is appropriate for your time frame it rallies  up again it pulls back to the conjunction of   the volume weighted average price from this  low and this peak right in here i don't buy   there sometimes you know a lot of people want to  buy it there fine you can do that i want to buy   it right here as it gets back above this volume  weighted average price and that's flattened out   so you calculated sorry to interrupt me in the  middle so basically what you do is for every   new swing high and swing low you have a volume  weighted average price perfectly said gaps or what   period sorry whatever time frame you're engaged on  okay so you know if if i'm if i'm day trading the   uh the e-mini i'm gonna do this on one minute time  frames sure i'll look at that low that occurred at   10 48 a.m and i'll put a volume weighted average  price off that i'll look at the high at 11 18   a.m and put a view app on that i'll see them come  together in the same exact way so again you ask a   great question and it's it it it sounds confusing  at times and i that's why i like to use different   time examples here i like to show an example of a  one minute chart and some swing traders investors   are going well that's just crazy this is just  crazy day trading stuff it's the same concepts on   a daily time frame it's the same concept over here  on the right on this 30 minute time frame where we   do the same exact thing where we see you know from  this peak here and this low the price converges   energy builds it makes the higher high right here  and we know for a fact at that point that the   average short from here is losing money we know  for a fact the average long from here factually   is making money this is supply and demand we have  actual price based evidence you cannot refute   it so to take it right there rather than wait  for the breakout over here a couple days later   you know people want to buy this breakout like  i was talking about earlier i want to buy here   and what happens we know the volume typically will  you know do something like this the volume will be   you know like this in here and then it'll start  to go like that and then we'll have the biggest   volume right there and then it pulls back and then  we see the volume like this people are like you   know here are saying hey look it's breaking out  on big volume i want to get involved and i say   sure take a third of mine i bought it right here  and then what happens to those breakout buyers ah   breakouts don't work the algos got me and you know  what they probably did and i sold some to you too   thank you very much for being uneducated um so  why do you say one third i'm very curious because   you have repeated this twice thrice so do you  have a staggered way of booking profit as well   that's a good question i i don't really have  a target on day one i will often look at   daily r2 you know traditional floor trader pivots  yeah daily r2 is a place where i think i've   seen some statistics you know 80 percent of the  range is 83 of the range is typically contained   within daily s2 and daily r2 right and you'll  often see the daily r2 is the exact high of the   day because there are programs saying 83 of the  time it trades within there let's sell a bunch of   our stock at that level and it becomes another  self-fulfilling prophecy i add shares there so   i'll take a third off there i'll also often you  know so that might be right here on that day   you know just a you know a two dollar gain on 120  stock even though i think hey it's in an uptrend   i expect that it should at least go to here and  continue higher but then as it breaks to this high   i'll say listen where does it come from  it's just come from you know 1 1 11 to 120   it's getting a little bit extended it's up you  know eight percent in five days i'll sell another   third on the breakout or at least raise my stop  very close in there so that if that so-called   breakout fails i'm gonna get out of third really  quickly and i would probably have my other stop   right here and i would have been stopped out of  the balance on that so so a third here a third   here and a third here and i might have gotten back  in or i might not get back in but i'm okay taking   the meat of this move and waiting for the  next one sure and you don't add your position   uh when you are in profit like with  every new breakout you add more positions   i i don't add on breakouts what i might do is  something you know along the lines of this is that   if on day one you know i buy right here your  rallies up and let's say this is daily r2   and i sell my first third and then it comes back  down like this and i have my daily view app is   right here right and the vwap off the peak is  right there i might add that third back right   here and set my stop on that third and then as  it rallies like this i'll either set my stop   under this high or low or something like this  and and you know get stopped out right there   or i'll sell by the end of the day at least you  know that third that i bought back and hold a   two-thirds position so i will day trade around  my swing trade position but i'm not you know if   i buy it here and i sell there i'm not going to  add here i'd never want to buy the breakout i   want to buy after the pullback no same same story  once we have this compression of range and the   volume weighted average price off the peak and  the low you know kind of converge that tells me   this is factually where the buyers are in control  i have the most upside because it's really just   beginning that trend and i have the least amount  of risk because my stop goes under this level here   so that's where i have the most bang for my buck  and i can maximize my position because i have a   uh you know tighter stop relative to the guys who  buy up here if they're using this low as a stop   they're gonna trade a third the size and have the  same amount of risk i have three times the size   that they have and i'm taking a third of my risk  off essentially reducing all the risk because now   if it comes back to break even i'll i'll get  stopped out at that break even but if i took   a dollar profit on a third of it i'll still  make 33 cents average on the full position   yeah yeah fair point got it okay so again  buying the dip i don't want to be labor that   point over and over again you know we so as  you just observed and i should have labeled   it on there is that you know from swing highs  and swing lows regardless of the time frame   from earnings so you know here this  company reported earnings that gapped lower   but look what happened the buyers came in  after a couple days and we took control   now you know people will sell that you know say  hey my target is the you know gap closure fine um   but then again they had another earnings report  and another earnings report so it you know once   it gaps here we anchor another volume weighted  average price and look at how well that was   defended we had a little shakeout prior to the  next earnings report and then you know this was   the next earnings report so we anchor a v-app off  of that and look where the buyers showed up again   so from this one you know buyers took control it  didn't pull back all the way but it maintained   above that we had a new momentum event once again  earnings buyers defending it over and over again   showing that this is how institutions buy they  say i like that i like the earnings report   let's buy 5 million shares between now and the  next quarter's earnings report and we want to buy   5 million shares so we're going to space it out  and anytime it gets down to v web since that event   we're going to be in there with strong bids that's  what's happening they're trying to absorb as many   shares as they can because that's their fair  value since that event we're anchored here   we're not anchored to the beginning of day  we chose that then we could anchor one here   and it would look like this right and we could  anchor one here and it would look like this so we   want to be a buyer there if we missed it somewhere  over here it would look like this and this it   would look like this and you know this time it  gapped and again you know we anchor it there   buyers came in and defended it so they're  great for using it as stops as well   when it tests that volume weighted average price  is what i call the handoff we we then say okay it   tested that successfully then prices pushed higher  so if i am a buyer here this was an important high   or low maybe i'm going to set my stops underneath  this rising volume weighted average price   so it's a it's a really versatile tool  to use for entries for stops for exits um   it's dynamic support and resistance it's  not just horizontal support resistance   so from this low in you know january of whatever  this stock is you know buyers emerged each of   these times it wasn't perfect but this is a level  of interest and when we see that level of interest   we look at it on shorter term time frames for  the evidence and maybe we buy it right here or   maybe we buy it right here we buy it right here  with our stop under there we buy it right here   we're not buying it i'm not buying it at least  right on the touch i want to buy as it says yes   that was support because we moved away from it and  now if it breaks below that then i'm going to stop   out and then the v wap starts to turn sideways it  breaks down it fine now instead of being support   i

2022-02-10 17:24

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