VMAP trading is a short for Volume Weighted Average Price trading. This strategy is the most important technical indicator for day traders. VWAP is similar to Moving Average but it incorporates the volumes of the shares.
We would like to recall you to remember that, most of the following strategies come from stock markets. We followed strategies provided in specialized and trusted books. This strategy comes from the book “How to day trad for a living”. Many well-known traders have used these strategies and they have prouved to work. However, we, the author of this article, are not responsible for your own riks, mistakes and losses.
Volume Weighted Average Price trading
The Moving average trend trading strategy is usually set a 1-minutes and 5-minutes time frames:
- Watch the price to see if the cryptocurrency shows respect towards VWAP
- Wait until the confirmation of VWAP break (for short selling)
- or VWAP support (for going long)
- Buy as close as possible to VWAP with a stop loss of a close above the VWAP.
- Keep the trade till the profit target or when a new support level or resistance level.
- Sell hal positions near the profit targt or support or resistance levle and move the stop up to your entry point or break-even.
- Usually short when traders try but fail to break the VWAP on 5-minute charts
- A buy order executed below the VWAP would be considered a good fill for them because the stock was bought at a below average price (meaning that the trader has bought their large position at a relatively discounted price compared to the market).
- Conversely, a sell order executed above the VWAP would be deemed a good fill because it was sold at an above average price. Therefore, VWAP is used by institutional traders to identify good entry and exit points.