Trading Strategies and VWAP Analysis

Up next, we have a guest. When history writes itself 10 years from now, you're going to remember Jim Dalton, John Murphy. You're going to remember Steve Nisan, and you are also going to remember Brian Shannon. Brian, how are you? Well, thank you. That's a heck of an introduction. You deserve it, man. I mean, I, you know, the stuff you put out there is great. And, you know, I appreciate it. Last year you sent me your book. I digested that like crazy. It's awesome. By the way, I recommended everybody. Alpha Trends is the axe handle for you, but how you been? I'm doing good. We've got volatility here in this market. It keeps us interested each day, right? I mean, it's one headline after another. And as you and Jason were just discussing, the market is climbing a wall of worry. It's going up on so-called bad news. It's amazing how resilient. I mean, I've been talking about this all week, how resilient the equity market is. I mean, we get the, it's not even kind of bad news. It's like really fricking bad news. And it just seems, keeps, keeps roaring. It's amazing. Yeah. It's, you know, it's why, it's why my mantra is only price pays because I, I have for, you know, previously spent years and years of my life trying to assign reason to the market. well, this is bad news, so it should go down. I got to exit my stocks. Maybe I should start selling short, but the market goes higher. And you can't argue with the market, but it's going to be a very expensive argument. And I got tired of those arguments. So I just defer to price action and try to create a good plan around price action. Be aware of what the news is. Be aware, obviously, of the catalysts coming, like the Fed this afternoon. I think the market's slowing down ahead of that right now. after a nice morning run. But it keeps you on your toes and it's why you have to have a strategy and a disciplined approach to that strategy. Yeah, absolutely. I'm with you on that. I know you do a lot of individual equity analysis as well as the future stuff, which is great, which I follow all the time and appreciate that. Any market in mind right now that you're looking at in the futures markets. You know, when it goes to the futures, I really only look at the AES and the NQ. I'm not a futures trader. So I look at those and it's not my primary thing to look at. I would rather look at the SPY and the Qs. But I think that there's certain days you have to look at both, even if you're an equity trader. And that is most particularly when we have a large overnight range that you're going to see a big difference between the VWAP from the overnight and the 9.30 a.m. New York open. So, you know, this morning we were, you know, kind of, well, we have, so let me just make this S&P on top or ES on top, NQ on the bottom. And this is, what is this, a 10-minute timeframe. So what I have on here is the blue is the anchor, the volume weighted average price from the beginning of the week. That's Sunday at, you know, 6 p.m. my time or 4 p.m. my time rather. And the red is the high of the week. And the green is the, you know, 4 p.m. Yes, it was whatever, 6 p.m. yesterday. And black is the NYSE open. So when we look at on this 10 minute time frame, it doesn't really look that different. But if we go down to, let's say, a two minute time frame on both of these, what we see is, you know, we started out the New York session. on some weakness it got back above the new york view app and then reclaimed the overnight view app and that's when this market really took off now we're fighting with the week to date and the anchor from the high in both of these markets for the week so i think we kind of probably settled down right now in these markets into you know maybe even we pull back down to the uh uh the the overnight VWAP. undercut the NYSE one. So a lot of times when we have a difference between them, a lot of times when we don't have much range overnight, you'll see that the NYSE kind of starts to really track along with the overnight VWAP. But because we had some range and some volume that there is a spread between there. And what we often see is, you know, the Q traders, the QQQ traders will look at it and they'll see that it gets stuck. below the VWAP for maybe 10, 15 minutes. And they'll think, hey, well, this is a great short. So they'll short it. And then maybe it comes down to this anchor and bounces significantly. And if you're not looking at both of them, You're missing that piece of information. And even for futures traders, I think you always should have not only your anchor from the beginning of the new session, but from the 9.30 a.m. as well, because you're going to see some time and people are like, well, which one's more important? And it just depends upon the day. It's not that one's more important than the other. It's just some days it will nail, you know, and look at the pullback. It came right down and those were right in the same spot at that time. But now we have more volume in the cues than we did in the, I'm sorry, in the New York session. So it's tracking a little bit more carefully. But these pullbacks, you know, once we get above those VWAPs and then we pull back, I never want to buy on the pullback. I don't want to buy the dip. I want to buy strength right after on this bar and then anticipate that it's going to run up to here. And then I start to use strategies like, you know, okay, if that's my objective, not necessarily my target, but that's my... upside level of interest. I'll look at that and I'll say either I'm going to sell some or I'm going to use a two-minute stop and put my stop underneath the, let me just delete all these so we can see it a little bit more clearly. So as we get up there, I will start to put my stop for a day trade underneath the two-minute bar. So as it goes and then as if it makes a two-minute low right there, that's where I'll sell at least part of it. um if i'm looking at it as a day trade if i think hey this is a swing trade that can continue then i will uh you know look at it that way but then again we've got to look at the bigger picture and the bigger picture uh if i can switch screens i know you guys like to look at the futures um but my so when i look at the bigger picture on uh trading view which is what these charts are they you know we had a new contract and the the chart gets all messed up basically Um, so I don't like to look at, you know, around that rollover time. I don't like to look at that. So what I'll do is, uh, I'm going to switch real quickly. Uh, if I can find, there it is, stop share. And where'd my share screen go? Um, what am I looking for this? So this is here. This is, this is the SMP 500, the spy, the cues right here in the upper right. Bottom left is the SMH, the semiconductors. Bottom right is the IWM. So what I look at here, Jim, is, and we've discussed this, one of my main intermediate term trend indicators is this orange line. That's the five-day moving average. And when people look at this, I'm looking at a 30-minute time frame. So they'll look at the moving average, and it'll say 65 periods. So I know that you know this, but I'm just refreshing for your audience. that a true five-day moving average isn't found on a daily time frame until the close. So what this does is it says a true five days was right here. This bar you can see was, you know, this was on Wednesday the 11th at 1230. Well, here we are this Wednesday at 1230 or 1130 rather. Anyways, so this is a full trailing five days, no matter what time of day it is. If we were looking at a daily chart, we would have a four, four days plus what, you know, two hours right now. So it's not five days yet. So anyways, the math means that there are, you know, 390 minutes in the equities market per day, 1950 minutes for five days. So a 30-minute chart. there are 65 of those periods in 1950 so we always want to you know say one 1950 divided by the time frame if the time frame was 30 i'm sorry 65 then we'll be using a 30 uh period moving average and what i look at here is jim we've seen you know just some pretty good choppiness the last really you know three week two two and a half weeks we're kind of stuck in this range here's a basically our midpoint. We've run up to that. That's the anchor from the high of the recovery, not the year-to-date high, but the recovery from the April 7th low. This is the week-to-date volume weighted average price is the black one. And we rallied right into, so, you know, thinking back to the futures and trading those on a short-term basis, you want to be aware of where do we have the potential to go? And that's right there at that five-day moving average. It often acts as resistance when it's rolling over, especially, you know, we... expended a lot of energy before a federal reserve meeting. Now the market kind of waits. We see some misdirection here and there. So now the question is what happens after the Fed, right? So we've got this level if we get back above it. And this has been right in here, an important level. So if we get above that and hold above it today, well, then that paves the way for continued upside and most likely a new all-time high in the SPY. Same is true for the NASDAQ. And, you know, this this market. So for the Nasdaq, the Q's. We've got these and what I actually should be doing. I apologize for that. Just make this a little bit easier to view. So that's where we are right now. Now we're kind of just biding time is the way I look at it. And the blue is the month to date anchor. The purple is off the May 23rd low. So those become levels of interest on the downside. Let's say we sell off strong on the Fed. Well, that 526. And this 596, my 595, 596, we've seen prior tests. Those become levels where I'll say, okay, if we sell off there quickly, maybe this is where we're going to bounce from. I wouldn't look to sell short down there because it would be too far extended. So let me slow down because I've just gone through a lot there and I'm not sure what we're looking to do here today. No, no, that's okay. You just gave us a couple of gold nuggets here. I know, we did two things in a row, but I think it's okay, and I do it all the time, and I know a lot of the folks that we talk to have an SPX chart and a QQQ chart and kind of do the math during the roll. That happens all the time, and that's a good thing to do, for sure. And so when you're thinking about the roll, because you have continuous charts, you have non-contiguous charts, you have the pure charts, it gets a little murky at roll time, especially this week where you got roll, you got OPEX, and you got a Fed meeting, and you got a holiday all wrapped up in like three days. So this is not a contract. This is a continuous market. So it's a good way to look at it. So, um, I don't mean to interrupt you, but, but I was going to point out that. The same thing actually happens to the SPY and the Q chart when they go ex-dividend because they'll drop $2.60 or whatever the dividend is per quarter on the SPY. It'll drop by that much. And then I'll look at my 30-minute chart and go, this chart's all messed up. So then I'll put more attention into the 30-minute chart of the futures because that one has shown that steady deterioration of the premium versus all at once with the dividend. Right. So let's go back to the futures for a second. The VWAPs that you're anchoring, you did, you started from the Globex session on Sunday, the open. Yes. And then you added... Sorry, go ahead. I'm with you. That's okay. I'm just trying to, because this is where the goal is in my mind. So that was kind of VWAP number one. VWAP number two was the daily VWAP, right? The session VWAP. And number three was the regular trading hour VWAP. Are those the three ones that you had up there? Let's take a look here. Yeah. So I had the week-to-date right here. Week-to-date. Anchor from the contract high, you know, from the week-to-date high. The most recent relevant high, basically, is what we're looking at there. um, for the week and those, you know, the, as they, you know, they've kind of converged. So they're in the same spot. Realistically, I could probably just get rid of that red one just to keep the chart clean. Cause it's in the same place as the week today. And I, I think that's probably a little bit more because it encompasses, you know, what's going on for the week. Um, and then, yes, this is the overnight session. So we gapped lower a little bit at, at the open. And then the 930 is where we are now. And if you really want to get nitty gritty and really super scalper day trade, you could put an anchor off of the peak of the high of the day and say, how do we respond to that? And basically, the 930 was the low of the day, so it wouldn't matter in there. But that's how aggressive do you want to be. So right now the futures, people would be looking at the futures saying. Well, it's nowhere near the VWAP. The VWAP is down at 54. Here we are at 58. Why are we bouncing at 58, 59? There's nothing here if you're just looking at the futures. But if you're looking at the 930 open, we're trying to stabilize right here, right now. Now, I don't think that means there's a trade because we've got the week-to-date anchor just overhead. We've got probably a quiet market going into the Fed here. So the market's probably going to go to sleep for a little bit. So let me, this is my, this is going to be my oscillator brain work right here. When the shorter term, the shorter duration VWAP crosses above the longer duration VWAP, is that a signal among itself or no? It hasn't been for me. Similar to moving average crossovers, I think they're horrible in terms of signals. I mean, look at, everyone was talking about the death cross in the S&P 500 15% ago, or whatever it was. We rallied maybe 12, 15% from the death cross. And from the time we were... So moving average crossovers represent... indecision. They say, okay, let's say the 10-day moving average crosses above the 50-day moving average. It means the shorter-term timeframe is higher, but the 50-day average is lower. We've got mixed messages from different timeframes. Or even the 50 and the 200, it doesn't tell you anything other than we have mixed messages from different timeframe participants. So to me, it's more about take, take. action, you know, take a look at shorter term timeframes to see what's really going on under the surface. So a moving at a VWAP crossover, you know, the, the, I think that it's more about price action where it is in relation to, you know, the, the VWAP from the 930. And did I just draw another one? I did. That's cause I meant to do this. So, you know, is this crossover right here? where you should have purchased. No, you should have purchased right here where it made that little higher high above the volume weighted average price. Then you also had, you know, SPY traders looking at it as an opening range breakout trade or just a high of the day trade. So, and, you know, and a defined risk below the low of this session right here, you know, that was tied quickly. So that was a real defined risk reward. with your potential to go up to the week-to-date volume-weighted average price. Yeah, no, I got you. And, you know, we have a lot of traders over the years that I've talked to that say, you know what, I only care about regular trading hours, tick and trend, whatever happened overnight in Globex I don't care about. And that's not my philosophy at all. I'd love to see the overnight action. But when you anchor a VWAP from RTH, which I do, a lot of people do, I think you got to add that extra element into it to see where it is in relationship to the other VWAPs. Yeah, and it depends on your timeframe, right? I mean, if you're a scalper, then absolutely you need to do that. And you probably should have an anchor off the high of the day at this point to see if it runs up to that and starts to come back. But it's less important because now that's where we have the week-to-date anchor. And you can see how. Yesterday afternoon, we came right up to the week-to-date anchor and then just caved in. So when you combine the different timeframes and realize it's all part of the bigger picture where we're approaching that all-time high, you don't want to get too aggressive on a short sale. So you're going to sell short on the shorter-term timeframes and expect them most likely to be day trades if you're a day trader. Yeah, I know. That totally makes sense. And yeah, no, I use them all the time. So let me ask you this though. So right now you're anchoring the top of the trend. In a downward environment, would you do the same thing on the bottom of a trend? Yes, always. Yeah. So if I was looking at this market and saying, you know, my bias is short and I'm looking to get short this market. What would make me want to get short this market? Let's say, let's see if I do this right. Now, how do I stop that from happening? I'm not the best user of this tool here. What I'm trying to do is, let's see if I can do it this way. This is above my pay grade. Yeah, what I'm trying to do is move the chart to the left so I have some blank space on the right to draw on. I don't remember how you do that. This is where we need the chat. Chat. We're phoning a friend, guys. This trading view chart's up here. How do you just kind of juggle over? What did I do there? Uh-oh. Uh-oh. Just get rid of that. Maybe that. No. Click. Andrew says click and drag. Wait. And then Michael's saying hit escape twice. Are you guys telling us the truth here? Oh, there. Escape twice, hit it. Thank you. So if I was looking to short this market, I would say, you know, this anchor off the peak, I would want to see it do this, maybe come down to the anchor from the overnight session, then kind of get trapped. below this anchor off the peak maybe you know bounce between the 9 30 and the overnight and then i would want to be probably shorting right here at because now the average participant from the overnight which was basically the same thing as the low is now in a losing position so this is a lower risk entry here with a stop above the most recent relevant lower high for my time frame which might be over here. And then I would look for it and say, okay, well, if it comes down to this level really quickly, I would probably cover a piece of it here because it would be extended. You know, you'd get the late shorts there. You'd get hit those stops under there. Now we'll probably do this and then continue down and probably do the same thing here. And I might even add back a little bit here. And what I would do at this point, Jim, if we got a bounce here, I would add a new VWAP from that low. And as it. It would tell me, I don't want a short on this rally because the buyers from that low are in control. But once the buyers start to lose control from that bounce point and it breaks below there, now I know that the average of all these longs is now losing. The average of all the shorts in there is winning. So now they're winning from the overnight position, from the low of the day position. So that's where the sellers. regain control we know that with 100 confidence it doesn't mean they're going to maintain control but that's where it's a fact that the average bounce buyer the volume weighted average price is lower is i'm sorry is higher than the the price right now meaning the average participant here is now losing money so what happens when people lose money well that's when they start to liquidate or that's when shorts start to say let's press on this because now we're back in control. Yeah, that makes total sense. So you did mention earlier this idea of confirmation candle. Talk a little bit about that. Okay, yeah. I was just confused because you said candle and I I'm sorry, confirmation price or bar or whatever. Yeah. So if we just go back, get rid of some of this so it's not quite so messy. So actually let's do this. Let's say I was looking at it and I was looking over here at the VWAP off of this low. So I would say, okay, did it come down too quickly or did it rally up and then break down? So I don't want to short, for instance, the touch of that VWAP. And if these were bars, they might look like this. So I would instead say I want to short as the sellers regain control, not just the touch, but as it moves back from there. So it breaks below the VWAP. I don't want to short it yet. It touches the VWAP. I don't want to short it. But as it breaks down, that to me says, okay, the buyers had their chance to push it back up through the VWAP from that low. They didn't do it. The sellers defended it. Now I look at it and say, I want to short right over here. And if I want a really tight stop above this high, if I want to give it a little bit more room than up here, maybe I'll put my stop on the add. So this is... would be the add, I would put my stop here. But if I'm still holding some from over here, then my stop on that would be above this level. So I would be managing the risk. And, you know, with this is my new position, I don't want to give it much room because it might reverse or it might come back up to the anchor from the overnight, which is way up here close to my entry. And I don't want to give that much stop. Instead, I'll risk just a little bit. And I'm still in a comfortable position on this. I've covered some down here. And now I can kind of let it wiggle a little bit. Got it. Makes sense. Michael Dominguez says his first book was a game changer for me. Thank you, Michael. We appreciate that. We did cut and paste the X handle in the chat, everybody. It was a great follow. Somebody even said, Brent, Brent says, X subscription. I've been talking for a while today. X subscription is 100% worth it. There you go. Awesome. Yeah. So, in any event, back to business. You showed us a two-minute time frame before. For intraday, for day trades, do you have a favorite time frame or just whatever? Um, you know, for day trades, it's probably a two minute chart. Um, you know, for the, for the first 15 minutes of the day, I think you've got to look at a one minute chart. Um, there was a time during the initial Trump, you know, uh, tariff stuff, I was trading on a 15 second chart because it was just so damn volatile. I mean, we were seeing, you know, 10 S and P points in, in 30 second bars. Um, so, you know, you can't manage risk on a one minute chart when you've got you know, 15 handles in the range. But generally, I'm not looking to be a day trader. In fact, you know, I'll do it on a day like today where I look at the market and say, you know, we're against these five-day moving averages. It doesn't seem likely that we're going to change direction in a big way yet. Or if we do, I don't want to be stuck with things. I don't want to put on new positions that are meant to be a swing trade because the volatility can be too big and I'll probably get shaken out of them even with reasonable stops. So my preferred timeframe is that of a swing trader. And, you know, I've got roadblocks right now that's been going for a month now. It's just crazy how strong the trend has been in there. Most of the time, though, my, my trades are, you know, a couple of days to maybe a couple of weeks on, you know, a straggler piece. So my main time frame, so let me answer your question, I guess, is that I, you know, so for entering a trade, first thing in the morning, I'm always looking at a one minute chart on the stocks that I'm looking at. And I use my, you know, what I call chase the gap or wait for VWAP, which is, you know, you've read about that. So if the market opens here, I'm sorry, closed here, opens here, runs up, pulls back a little bit. And then the VWAP will look like this. So I don't want to chase that gap because it might continue lower. Or if it does this, as it gets back above the daily VWAP, then I want to be a buyer here with my stop below the low of the day. Because it gapped up. It ran a little bit. Sellers took control for a little while. But then they blew their opportunity to push it back down and close that gap. So. This is a stock that I'm looking at on a 15-minute time frame, a 30-minute time frame, and a daily time frame that looks like it should be able to continue to trend higher. So I'll enter on the one-minute chart. And then I might set my stop there or part of my stop there and have my swing stop below yesterday's closing area on half of it. And then I try to back away quickly from the one-minute chart. That's just for precise entry. and then I'll look at the higher lows on a... 15-minute time frame and try to trail my stops up under those. Got it. Got it. That's awesome. That makes total sense. Yeah, I'm a simple man. I like to add the I have the session VWAP on a 10- or 30-minute chart. And I love to see a market that's kind of trending intraday. And I love what's called the I don't know if you called it this or where I learned this from. I might have made it up. But the VWAP touch. I'm looking for a VWAP touch because you get natural retracements all the time, even in a trend market. And when I see that VWAP touch and the VWAP holds and I get the next candle is my confirmation candle, then I know it's safe to stick my feet into the water. Yeah, and that's something I wrote about in the book is buy the touch or the bounce. And some people want to buy the touch, and that's fine. I mean, it can work. It still blows my mind how often it'll come down right to the VWAP and bounce. Whereas I'm looking for a higher low above it. So I mean, a higher high above it. I might not buy till over here, whereas the touch will buy right here. So, you know, and now do I want to sell short the touch of the anchor from the high or do I want to sell short right here as it's breaking down with my intention of, is it going to, you know, is this a trade I actually even want to take? Because I think that it's going to come down back to this anchor. But the more times this anchor from the 930 is tested, the more likely it is going to fail and come down to here next. And now those who are just looking at the SPY are going to say, wow, it's breaking VWAP. It's going to fall apart. It's going to go down to the lows. And then they short it. It comes down to here and it bounces back up. And we just have this frustrating range. And that's why, again, you've got to be aware of both anchors. In particular, when we have an overnight range, if it was just a dead overnight range where the spy traded in an eight handle range, then it's with very low volume, then it's not really going to matter. They're going to be in about the same spot. Yeah, I got it. That's awesome stuff, man. Well, listen, I appreciate you being here with us today. I really do. It's great to talk to you again. Thanks for having me again, Jim. Yeah, my pleasure, everybody. Remember, Alpha Trends on X. You could follow, get engaged with Brian. Great stuff. Get the book. It's a great book. And not only that, you know, the VWAP book is, I should shut up, but I'm not going to. The VWAP book is more than just a VWAP book. It's a trading book. There's a lot of good. tips and nuggets in there, you know, notwithstanding the VWAP. So I'm going to recommend it big time. So anyway, hopefully folks get it. All right. Well, thank you. All right, folks.

Well, thank you. That's a heck of an introduction. You deserve it, man.

I mean, I, you know, the stuff you put out there is great. And, you know, I appreciate it. Last year you sent me your book.

I digested that like crazy. It's awesome. By the way, I recommended everybody.

Alpha Trends is the axe handle for you, but how you been? I'm doing good. We've got volatility here in this market. It keeps us interested each day, right?

I mean, it's one headline after another. And as you and Jason were just discussing, the market is climbing a wall of worry. It's going up on so-called bad news. It's amazing how resilient.

I mean, I've been talking about this all week, how resilient the equity market is. I mean, we get the, it's not even kind of bad news. It's like really fricking bad news.

And it just seems, keeps, keeps roaring. It's amazing. Yeah.

It's, you know, it's why, it's why my mantra is only price pays because I, I have for, you know, previously spent years and years of my life trying to assign reason to the market. well, this is bad news, so it should go down. I got to exit my stocks.

Maybe I should start selling short, but the market goes higher. And you can't argue with the market, but it's going to be a very expensive argument. And I got tired of those arguments. So I just defer to price action and try to create a good plan around price action. Be aware of what the news is.

Be aware, obviously, of the catalysts coming, like the Fed this afternoon. I think the market's slowing down ahead of that right now. after a nice morning run. But it keeps you on your toes and it's why you have to have a strategy and a disciplined approach to that strategy.

Yeah, absolutely. I'm with you on that. I know you do a lot of individual equity analysis as well as the future stuff, which is great, which I follow all the time and appreciate that. Any market in mind right now that you're looking at in the futures markets. You know, when it goes to the futures, I really only look at the AES and the NQ.

I'm not a futures trader. So I look at those and it's not my primary thing to look at. I would rather look at the SPY and the Qs.

But I think that there's certain days you have to look at both, even if you're an equity trader. And that is most particularly when we have a large overnight range that you're going to see a big difference between the VWAP from the overnight and the 9.30 a.m. New York open.

So, you know, this morning we were, you know, kind of, well, we have, so let me just make this S&P on top or ES on top, NQ on the bottom. And this is, what is this, a 10-minute timeframe. So what I have on here is the blue is the anchor, the volume weighted average price from the beginning of the week.

That's Sunday at, you know, 6 p.m. my time or 4 p.m. my time rather. And the red is the high of the week. And the green is the, you know, 4 p.m.

Yes, it was whatever, 6 p.m. yesterday. And black is the NYSE open. So when we look at on this 10 minute time frame, it doesn't really look that different.

But if we go down to, let's say, a two minute time frame on both of these, what we see is, you know, we started out the New York session. on some weakness it got back above the new york view app and then reclaimed the overnight view app and that's when this market really took off now we're fighting with the week to date and the anchor from the high in both of these markets for the week so i think we kind of probably settled down right now in these markets into you know maybe even we pull back down to the uh uh the the overnight VWAP. undercut the NYSE one. So a lot of times when we have a difference between them, a lot of times when we don't have much range overnight, you'll see that the NYSE kind of starts to really track along with the overnight VWAP.

But because we had some range and some volume that there is a spread between there. And what we often see is, you know, the Q traders, the QQQ traders will look at it and they'll see that it gets stuck. below the VWAP for maybe 10, 15 minutes. And they'll think, hey, well, this is a great short. So they'll short it.

And then maybe it comes down to this anchor and bounces significantly. And if you're not looking at both of them, You're missing that piece of information. And even for futures traders, I think you always should have not only your anchor from the beginning of the new session, but from the 9.30 a.m.

as well, because you're going to see some time and people are like, well, which one's more important? And it just depends upon the day. It's not that one's more important than the other. It's just some days it will nail, you know, and look at the pullback. It came right down and those were right in the same spot at that time.

But now we have more volume in the cues than we did in the, I'm sorry, in the New York session. So it's tracking a little bit more carefully. But these pullbacks, you know, once we get above those VWAPs and then we pull back, I never want to buy on the pullback.

I don't want to buy the dip. I want to buy strength right after on this bar and then anticipate that it's going to run up to here. And then I start to use strategies like, you know, okay, if that's my objective, not necessarily my target, but that's my... upside level of interest.

I'll look at that and I'll say either I'm going to sell some or I'm going to use a two-minute stop and put my stop underneath the, let me just delete all these so we can see it a little bit more clearly. So as we get up there, I will start to put my stop for a day trade underneath the two-minute bar. So as it goes and then as if it makes a two-minute low right there, that's where I'll sell at least part of it. um if i'm looking at it as a day trade if i think hey this is a swing trade that can continue then i will uh you know look at it that way but then again we've got to look at the bigger picture and the bigger picture uh if i can switch screens i know you guys like to look at the futures um but my so when i look at the bigger picture on uh trading view which is what these charts are they you know we had a new contract and the the chart gets all messed up basically Um, so I don't like to look at, you know, around that rollover time. I don't like to look at that.

So what I'll do is, uh, I'm going to switch real quickly. Uh, if I can find, there it is, stop share. And where'd my share screen go?

Um, what am I looking for this? So this is here. This is, this is the SMP 500, the spy, the cues right here in the upper right.

Bottom left is the SMH, the semiconductors. Bottom right is the IWM. So what I look at here, Jim, is, and we've discussed this, one of my main intermediate term trend indicators is this orange line.

That's the five-day moving average. And when people look at this, I'm looking at a 30-minute time frame. So they'll look at the moving average, and it'll say 65 periods.

So I know that you know this, but I'm just refreshing for your audience. that a true five-day moving average isn't found on a daily time frame until the close. So what this does is it says a true five days was right here. This bar you can see was, you know, this was on Wednesday the 11th at 1230. Well, here we are this Wednesday at 1230 or 1130 rather. Anyways, so this is a full trailing five days, no matter what time of day it is.

If we were looking at a daily chart, we would have a four, four days plus what, you know, two hours right now. So it's not five days yet. So anyways, the math means that there are, you know, 390 minutes in the equities market per day, 1950 minutes for five days.

So a 30-minute chart. there are 65 of those periods in 1950 so we always want to you know say one 1950 divided by the time frame if the time frame was 30 i'm sorry 65 then we'll be using a 30 uh period moving average and what i look at here is jim we've seen you know just some pretty good choppiness the last really you know three week two two and a half weeks we're kind of stuck in this range here's a basically our midpoint. We've run up to that. That's the anchor from the high of the recovery, not the year-to-date high, but the recovery from the April 7th low.

This is the week-to-date volume weighted average price is the black one. And we rallied right into, so, you know, thinking back to the futures and trading those on a short-term basis, you want to be aware of where do we have the potential to go? And that's right there at that five-day moving average. It often acts as resistance when it's rolling over, especially, you know, we... expended a lot of energy before a federal reserve meeting.

Now the market kind of waits. We see some misdirection here and there. So now the question is what happens after the Fed, right?

So we've got this level if we get back above it. And this has been right in here, an important level. So if we get above that and hold above it today, well, then that paves the way for continued upside and most likely a new all-time high in the SPY.

Same is true for the NASDAQ. And, you know, this this market. So for the Nasdaq, the Q's. We've got these and what I actually should be doing. I apologize for that.

Just make this a little bit easier to view. So that's where we are right now. Now we're kind of just biding time is the way I look at it.

And the blue is the month to date anchor. The purple is off the May 23rd low. So those become levels of interest on the downside.

Let's say we sell off strong on the Fed. Well, that 526. And this 596, my 595, 596, we've seen prior tests. Those become levels where I'll say, okay, if we sell off there quickly, maybe this is where we're going to bounce from.

I wouldn't look to sell short down there because it would be too far extended. So let me slow down because I've just gone through a lot there and I'm not sure what we're looking to do here today. No, no, that's okay.

You just gave us a couple of gold nuggets here. I know, we did two things in a row, but I think it's okay, and I do it all the time, and I know a lot of the folks that we talk to have an SPX chart and a QQQ chart and kind of do the math during the roll. That happens all the time, and that's a good thing to do, for sure.

And so when you're thinking about the roll, because you have continuous charts, you have non-contiguous charts, you have the pure charts, it gets a little murky at roll time, especially this week where you got roll, you got OPEX, and you got a Fed meeting, and you got a holiday all wrapped up in like three days. So this is not a contract. This is a continuous market. So it's a good way to look at it.

So, um, I don't mean to interrupt you, but, but I was going to point out that. The same thing actually happens to the SPY and the Q chart when they go ex-dividend because they'll drop $2.60 or whatever the dividend is per quarter on the SPY. It'll drop by that much. And then I'll look at my 30-minute chart and go, this chart's all messed up.

So then I'll put more attention into the 30-minute chart of the futures because that one has shown that steady deterioration of the premium versus all at once with the dividend. Right. So let's go back to the futures for a second. The VWAPs that you're anchoring, you did, you started from the Globex session on Sunday, the open. Yes.

And then you added... Sorry, go ahead. I'm with you.

That's okay. I'm just trying to, because this is where the goal is in my mind. So that was kind of VWAP number one.

VWAP number two was the daily VWAP, right? The session VWAP. And number three was the regular trading hour VWAP.

Are those the three ones that you had up there? Let's take a look here. Yeah. So I had the week-to-date right here.

Week-to-date. Anchor from the contract high, you know, from the week-to-date high. The most recent relevant high, basically, is what we're looking at there. um, for the week and those, you know, the, as they, you know, they've kind of converged.

So they're in the same spot. Realistically, I could probably just get rid of that red one just to keep the chart clean. Cause it's in the same place as the week today.

And I, I think that's probably a little bit more because it encompasses, you know, what's going on for the week. Um, and then, yes, this is the overnight session. So we gapped lower a little bit at, at the open. And then the 930 is where we are now.

And if you really want to get nitty gritty and really super scalper day trade, you could put an anchor off of the peak of the high of the day and say, how do we respond to that? And basically, the 930 was the low of the day, so it wouldn't matter in there. But that's how aggressive do you want to be.

So right now the futures, people would be looking at the futures saying. Well, it's nowhere near the VWAP. The VWAP is down at 54. Here we are at 58. Why are we bouncing at 58, 59?

There's nothing here if you're just looking at the futures. But if you're looking at the 930 open, we're trying to stabilize right here, right now. Now, I don't think that means there's a trade because we've got the week-to-date anchor just overhead. We've got probably a quiet market going into the Fed here. So the market's probably going to go to sleep for a little bit.

So let me, this is my, this is going to be my oscillator brain work right here. When the shorter term, the shorter duration VWAP crosses above the longer duration VWAP, is that a signal among itself or no? It hasn't been for me. Similar to moving average crossovers, I think they're horrible in terms of signals.

I mean, look at, everyone was talking about the death cross in the S&P 500 15% ago, or whatever it was. We rallied maybe 12, 15% from the death cross. And from the time we were...

So moving average crossovers represent... indecision. They say, okay, let's say the 10-day moving average crosses above the 50-day moving average.

It means the shorter-term timeframe is higher, but the 50-day average is lower. We've got mixed messages from different timeframes. Or even the 50 and the 200, it doesn't tell you anything other than we have mixed messages from different timeframe participants.

So to me, it's more about take, take. action, you know, take a look at shorter term timeframes to see what's really going on under the surface. So a moving at a VWAP crossover, you know, the, the, I think that it's more about price action where it is in relation to, you know, the, the VWAP from the 930. And did I just draw another one?

I did. That's cause I meant to do this. So, you know, is this crossover right here?

where you should have purchased. No, you should have purchased right here where it made that little higher high above the volume weighted average price. Then you also had, you know, SPY traders looking at it as an opening range breakout trade or just a high of the day trade.

So, and, you know, and a defined risk below the low of this session right here, you know, that was tied quickly. So that was a real defined risk reward. with your potential to go up to the week-to-date volume-weighted average price.

Yeah, no, I got you. And, you know, we have a lot of traders over the years that I've talked to that say, you know what, I only care about regular trading hours, tick and trend, whatever happened overnight in Globex I don't care about. And that's not my philosophy at all.

I'd love to see the overnight action. But when you anchor a VWAP from RTH, which I do, a lot of people do, I think you got to add that extra element into it to see where it is in relationship to the other VWAPs. Yeah, and it depends on your timeframe, right? I mean, if you're a scalper, then absolutely you need to do that.

And you probably should have an anchor off the high of the day at this point to see if it runs up to that and starts to come back. But it's less important because now that's where we have the week-to-date anchor. And you can see how.

Yesterday afternoon, we came right up to the week-to-date anchor and then just caved in. So when you combine the different timeframes and realize it's all part of the bigger picture where we're approaching that all-time high, you don't want to get too aggressive on a short sale. So you're going to sell short on the shorter-term timeframes and expect them most likely to be day trades if you're a day trader. Yeah, I know.

That totally makes sense. And yeah, no, I use them all the time. So let me ask you this though. So right now you're anchoring the top of the trend. In a downward environment, would you do the same thing on the bottom of a trend?

Yes, always. Yeah. So if I was looking at this market and saying, you know, my bias is short and I'm looking to get short this market. What would make me want to get short this market?

Let's say, let's see if I do this right. Now, how do I stop that from happening? I'm not the best user of this tool here. What I'm trying to do is, let's see if I can do it this way.

This is above my pay grade. Yeah, what I'm trying to do is move the chart to the left so I have some blank space on the right to draw on. I don't remember how you do that.

This is where we need the chat. Chat. We're phoning a friend, guys. This trading view chart's up here. How do you just kind of juggle over?

What did I do there? Uh-oh. Uh-oh.

Just get rid of that. Maybe that. No. Click.

Andrew says click and drag. Wait. And then Michael's saying hit escape twice. Are you guys telling us the truth here? Oh, there.

Escape twice, hit it. Thank you. So if I was looking to short this market, I would say, you know, this anchor off the peak, I would want to see it do this, maybe come down to the anchor from the overnight session, then kind of get trapped. below this anchor off the peak maybe you know bounce between the 9 30 and the overnight and then i would want to be probably shorting right here at because now the average participant from the overnight which was basically the same thing as the low is now in a losing position so this is a lower risk entry here with a stop above the most recent relevant lower high for my time frame which might be over here. And then I would look for it and say, okay, well, if it comes down to this level really quickly, I would probably cover a piece of it here because it would be extended.

You know, you'd get the late shorts there. You'd get hit those stops under there. Now we'll probably do this and then continue down and probably do the same thing here.

And I might even add back a little bit here. And what I would do at this point, Jim, if we got a bounce here, I would add a new VWAP from that low. And as it.

It would tell me, I don't want a short on this rally because the buyers from that low are in control. But once the buyers start to lose control from that bounce point and it breaks below there, now I know that the average of all these longs is now losing. The average of all the shorts in there is winning. So now they're winning from the overnight position, from the low of the day position.

So that's where the sellers. regain control we know that with 100 confidence it doesn't mean they're going to maintain control but that's where it's a fact that the average bounce buyer the volume weighted average price is lower is i'm sorry is higher than the the price right now meaning the average participant here is now losing money so what happens when people lose money well that's when they start to liquidate or that's when shorts start to say let's press on this because now we're back in control. Yeah, that makes total sense.

So you did mention earlier this idea of confirmation candle. Talk a little bit about that. Okay, yeah.

I was just confused because you said candle and I I'm sorry, confirmation price or bar or whatever. Yeah. So if we just go back, get rid of some of this so it's not quite so messy.

So actually let's do this. Let's say I was looking at it and I was looking over here at the VWAP off of this low. So I would say, okay, did it come down too quickly or did it rally up and then break down? So I don't want to short, for instance, the touch of that VWAP.

And if these were bars, they might look like this. So I would instead say I want to short as the sellers regain control, not just the touch, but as it moves back from there. So it breaks below the VWAP.

I don't want to short it yet. It touches the VWAP. I don't want to short it. But as it breaks down, that to me says, okay, the buyers had their chance to push it back up through the VWAP from that low. They didn't do it.

The sellers defended it. Now I look at it and say, I want to short right over here. And if I want a really tight stop above this high, if I want to give it a little bit more room than up here, maybe I'll put my stop on the add.

So this is... would be the add, I would put my stop here. But if I'm still holding some from over here, then my stop on that would be above this level. So I would be managing the risk.

And, you know, with this is my new position, I don't want to give it much room because it might reverse or it might come back up to the anchor from the overnight, which is way up here close to my entry. And I don't want to give that much stop. Instead, I'll risk just a little bit. And I'm still in a comfortable position on this. I've covered some down here.

And now I can kind of let it wiggle a little bit. Got it. Makes sense. Michael Dominguez says his first book was a game changer for me. Thank you, Michael.

We appreciate that. We did cut and paste the X handle in the chat, everybody. It was a great follow.

Somebody even said, Brent, Brent says, X subscription. I've been talking for a while today. X subscription is 100% worth it.

There you go. Awesome. Yeah.

So, in any event, back to business. You showed us a two-minute time frame before. For intraday, for day trades, do you have a favorite time frame or just whatever? Um, you know, for day trades, it's probably a two minute chart. Um, you know, for the, for the first 15 minutes of the day, I think you've got to look at a one minute chart.

Um, there was a time during the initial Trump, you know, uh, tariff stuff, I was trading on a 15 second chart because it was just so damn volatile. I mean, we were seeing, you know, 10 S and P points in, in 30 second bars. Um, so, you know, you can't manage risk on a one minute chart when you've got you know, 15 handles in the range.

But generally, I'm not looking to be a day trader. In fact, you know, I'll do it on a day like today where I look at the market and say, you know, we're against these five-day moving averages. It doesn't seem likely that we're going to change direction in a big way yet.

Or if we do, I don't want to be stuck with things. I don't want to put on new positions that are meant to be a swing trade because the volatility can be too big and I'll probably get shaken out of them even with reasonable stops. So my preferred timeframe is that of a swing trader.

And, you know, I've got roadblocks right now that's been going for a month now. It's just crazy how strong the trend has been in there. Most of the time, though, my, my trades are, you know, a couple of days to maybe a couple of weeks on, you know, a straggler piece. So my main time frame, so let me answer your question, I guess, is that I, you know, so for entering a trade, first thing in the morning, I'm always looking at a one minute chart on the stocks that I'm looking at.

And I use my, you know, what I call chase the gap or wait for VWAP, which is, you know, you've read about that. So if the market opens here, I'm sorry, closed here, opens here, runs up, pulls back a little bit. And then the VWAP will look like this. So I don't want to chase that gap because it might continue lower.

Or if it does this, as it gets back above the daily VWAP, then I want to be a buyer here with my stop below the low of the day. Because it gapped up. It ran a little bit.

Sellers took control for a little while. But then they blew their opportunity to push it back down and close that gap. So. This is a stock that I'm looking at on a 15-minute time frame, a 30-minute time frame, and a daily time frame that looks like it should be able to continue to trend higher. So I'll enter on the one-minute chart.

And then I might set my stop there or part of my stop there and have my swing stop below yesterday's closing area on half of it. And then I try to back away quickly from the one-minute chart. That's just for precise entry.

and then I'll look at the higher lows on a... 15-minute time frame and try to trail my stops up under those. Got it. Got it.

That's awesome. That makes total sense. Yeah, I'm a simple man. I like to add the I have the session VWAP on a 10- or 30-minute chart. And I love to see a market that's kind of trending intraday.

And I love what's called the I don't know if you called it this or where I learned this from. I might have made it up. But the VWAP touch. I'm looking for a VWAP touch because you get natural retracements all the time, even in a trend market.

And when I see that VWAP touch and the VWAP holds and I get the next candle is my confirmation candle, then I know it's safe to stick my feet into the water. Yeah, and that's something I wrote about in the book is buy the touch or the bounce. And some people want to buy the touch, and that's fine.

I mean, it can work. It still blows my mind how often it'll come down right to the VWAP and bounce. Whereas I'm looking for a higher low above it.

So I mean, a higher high above it. I might not buy till over here, whereas the touch will buy right here. So, you know, and now do I want to sell short the touch of the anchor from the high or do I want to sell short right here as it's breaking down with my intention of, is it going to, you know, is this a trade I actually even want to take? Because I think that it's going to come down back to this anchor. But the more times this anchor from the 930 is tested, the more likely it is going to fail and come down to here next.

And now those who are just looking at the SPY are going to say, wow, it's breaking VWAP. It's going to fall apart. It's going to go down to the lows. And then they short it. It comes down to here and it bounces back up.

And we just have this frustrating range. And that's why, again, you've got to be aware of both anchors. In particular, when we have an overnight range, if it was just a dead overnight range where the spy traded in an eight handle range, then it's with very low volume, then it's not really going to matter.

They're going to be in about the same spot. Yeah, I got it. That's awesome stuff, man. Well, listen, I appreciate you being here with us today. I really do.

It's great to talk to you again. Thanks for having me again, Jim. Yeah, my pleasure, everybody.

Remember, Alpha Trends on X. You could follow, get engaged with Brian. Great stuff. Get the book.

It's a great book. And not only that, you know, the VWAP book is, I should shut up, but I'm not going to. The VWAP book is more than just a VWAP book. It's a trading book. There's a lot of good.

tips and nuggets in there, you know, notwithstanding the VWAP. So I'm going to recommend it big time. So anyway, hopefully folks get it. All right.

Well, thank you. All right, folks.

Transcript for:Trading Strategies and VWAP Analysis

Transcript for:
Trading Strategies and VWAP Analysis