How i am learning to be consistent (The VWAP strategy)

[Willy 25]

I will explain the strategy that is beginning to give me consistency in trading after almost 2 years between simulator and real. Basically it is a well-known strategy and well explained by Andrew in his book, I sometimes  mix it with other strategies for entry and exit. According to the data that the daily trades throw me, the concepts written here could change.

This topic is created with the purpose that we interact and learn from each other. I am open to any type of comments, whether or not they are in accordance with the concepts issued here.

Other topics to be taken into account to day trading consistently:

1- Choose stock in play (earnings are the best gaping 2% or more)
2. Wait at least 7 min to determine the correct setup.
3. Keep your losers smaller than your winners.
4. Watch for 2: 1 ratio.
5. Define your daily goal (1-2% of your equity), maximum loss per trade, maximum loss for the day (if you have 3 erroneous trades in a row take a break).
6. It is good to watch at the price action. With time you get to realize how the price should behave in the setup. This is important to get out with the least possible loss. As Andrew always says "Commissions are cheap, you can always exit a trade and enter again if the setup continues".

 

I will put several examples of the setups and I will classify the best ones, the regular ones and not so good ones. These setups start in March 2019 (below you can see the date), they have marked trades but they will not be taken into account for the explanation.

[Willy 25]

GOOD SETUPS

 

The idea is to watch 5 and 1 min chart. In this case the stock open below VWAP but at 9:35 crossed it. We should wait for the pull back and buy close to VWAP. Your fisrt target should be a daily level or a pre market level. You stop loss is a few cents below VWAP. 

In this case the 5 min candle opens below VWAP and closes above VWAP. We wait for the pull back to VWAP and buy long.

GWRE: this is the same case but for the short side.

 

 

BA: this one is the same setup but this time the candle in one min chart crossed at 9:37 

 

 

 

 

 

 

[Willy 25]

NOT SO GOOD SETUPS

GPS: Very choppy price action at open (watch the first 5 (1 min) candle).

BURL: This one didn't give a chance to get in after 5 min. (could be at 9:37 but VWAP was not so close)

BIG: very choppy price action at open.

 

 

 

[Erwann 13]

Hi,

Thanks a lot for sharing.

Quote

I will explain the strategy that is beginning to give me consistency in trading after almost 2 years between simulator and real. 

That's a long run. Congratulations for not giving up. How long have you been profitable with this technique please?

[Willy 25]

12 hours ago, tardi44 said:

Hi,

Thanks a lot for sharing.

That's a long run. Congratulations for not giving up. How long have you been profitable with this technique please?

Hi,

Thanks. I have been testing this strategy for 2 months in simulator (i learned the hard way to test the strategies in simulator first). I plan to be back in the real account next week.

[Willy 25]

SOME SETUPS (25-29 March, 2019)

AAPL: Watching at open 1 min candles. Only the fisrt min was white. After the stock crossed VWAP 9:34 is agood idea to short it close to VWAP coul be a 9:36 or wait for the confirmation and entry at 9:37. I took the second move, after that engulfing 5 min candle i wait until the stock crossed VWAP and go long  if the stock makes a pull back to VWAP i add to my position. I didn't trade very well because my first target was the level at 192 y the other one a HOD but i sold it  early as always.

 

BBBY: here the first 5 min were very choppy but from 9:36  to 9:30 the 1 candles were better and it was holding VWAP, i got in and wait with the half for HOD this time.  

 

CNC: this is one of the mistake you have to avoid. I got in long way to far from VWAP in this case i saw my mistakes and get out quickly. After the red candle on 5 min closing below VWAP that was an indicator for short and later confirmation in 1 min chart ( i missed that one). The second trade is another mistake that i am going to try to avoid in the future. I shlud have wait for the stock to close over VWAP to go long. The third trade was another mistake because i went short to far from VWAP.The ideal trade was to wait  for the rebound at 10:24 and go short. Like Andrew says, our job is to wait for the setup come to us. 

 

CVS: this is a good setup. The stock sell off at opening but from 9:40 to 10:00 hold a bottom then big white candle that closes above VWAP.  In the mini pull back i get in with HOD as the ultimate target.

 

WCG: The big rejection in the 2nd 5 min candle (it closes below VWAP too), i short it and cover at the big drop. Then i made the same mistake of previous days  in the second trade, i tried to anticipate the move up and fail. I should  have wait for confirmation over VWAp to go long or a rejection to go short. 

 

CELG: good setup, first 5 min over VWAP. I took it long and get out at the pull black (i should have added to my position). After i realized my mistake i got in long again and it works very good.

 

 

 

 

 

 

 

[Willy 25]

Monday April 22, 2019

 

HAL: This is one of the best setup, watching 1 min chart  in the first 5 min  the stock sell off then came back to VWAP. In this case i short it close to VWAP but i cover for a lost as soon as 1 min candle closed over VWAP. Lesson that i learned, the  stop loss should be the big white candle at 9:34. After that the stock sell off all the way to PCL which was my target. 

 

KMB: First 5 min over VWAP  indicates a long (volume come in at 9:34). i had a decent entry but get out with no reason. Lesson: in this type of trade the stop loss is VWAP, you could add to your position in any pull back over VWAP.

 

 

MDSO: in this setup the first 5 min on 1 min chart the stock hold over VWAP but the 5 min candle close below VWAP. Those big candle are hard to trade and manage the risk and 1 min candle at 9:32 and 9:33 is a doji .  At 9:40 was a good entry for short but the choppy price action indicates that is not a good stock to hold a long time.

 

 

 

[Willy 25]

Tuesday April 23, 2019

 

KO: this is the same setup on HAL (Monday), the stock sell off then came back,  but didn't work this time then i focused in the long side and it worked.

 

 

 

[Willy 25]

Wednesday, April 24, 2019

BSX: the firsts 5 min were to choppy. not a good set up.

 

 

[Willy 25]

Thursday, April 25, 2019

 

 

[Willy 25]

Friday, April 26, 2019

F: good setup. Perfect entry at 9:36

 

AAL: not so good setup.

XOM: Not a good setup. Very choppy price action at open.

 

 

NVDA: good setup. Sell off, back to VWAP then close below VWAP. 

 

 

[naka 1]

this is one of my setups, too. i call it the fake break, because it starts off above/below VWAP, then moves in the opposite direction. i've played it quite often on AMD.

[Greg D 22]

Great stuff Willy!
I've been in the sim about 3 weeks and it's been a bit of information overload.  Two days ago I decided to just focus on VWAP trading and taking entries around that with my stop loss on the other side of VWAP.  It seems to be really helping as I'm now seeing what's important on the charts. 
I've learned that ORBs are so dangerous and it almost seems like I'm guessing which direction the stock will go!  I've been red on 4 of 5 days in the past but I guess that's what the sim is for. We'll see how things go when focusing on VWAP trading!