let's talk about v-wop guys volume weighted average price every trader's friend you see it on multiple charts almost on a daily basis uh we're going to dig into first of all what is vwop and then second of all how we can go about using it to assist our trading again regardless of your time frame if you are an intraday trader you should be looking at vwop guys yes you should brandon and uh thank you for that i get to do the uh the important part here which is well i'm kidding uh the serious part you have to understand what the definition means uh for volume weighted average price so let's just get this out of the way right off the bat here uh v wap equals the sum of price times the volume at that particular price and can be divided by the sum of total volume the key thing here and i know we're going to go in depth about this so you can understand it a little bit better visually on a chart but for each individual time frame if it's a one minute chart you're summing those figures for a one minute time frame if it's a 10 minute chart of course it'll be a little bit different because you're summing up a different uh time frame on that candle so now that we have that out of the way what does it look like visually when it's on your chart because i know we all have it and most traders are looking at it that line right in the middle of everybody's uh daily chart or probably more likely a one minute or three minute chart shot yeah i'm going to go with thank you neil and it's the only chart if you watch the show you'll know it's really the only technical indicator that i use is volume weight at average price and i use a one minute chart uh for scalping purposes and i don't think there's a better example uh today than ford so basically what you want to try to identify at least what i do when i'm trying to use op is what direction you want to go into so if we're going to look at ford on a daily chart this is just a moving average 50 period i've identified here that ford broke this 50 period moving average and the trend obviously in the last one two three four you know six or seven days has been upside so i'm already looking long for ford so with that being said let's now move over to today's chart the important thing to look at this is 9 30 right and i have this here on purpose we can actually maybe move this over a little bit to show you the end trade here but volume weighted average price is going to give you a little bit of a misleading indicator in the first let's call it 10 or 15 minutes why is that because the very first market on open print is a monstrous prince so that will affect remember it takes the sum of the volume so that's going to affect this and give you a volume weighted average price basically rate where that happens so that's why when you're looking early i don't consider even this break here at 9 39 when we break above view op i'm not super interested in that break either because volume weight average price is still trying to figure itself out you can see it swoops down because we get volume added up here on a move down in ford if you're looking long these this move down is great to pick it up but we're talking about v-wap here so what i like to do is look at it maybe like i said around 10 o'clock something like that we know we want to get long this name so what i wait for is i don't want to take the high of the day at this point i want to wait for a pull back in to v-wop so when we get that pull back in to me that's where you green light this trade so you can start to get long in front of view up i think that's a very important key when it breaks it can break nasty in this situation it doesn't we already want to go long for it so we're very very confident in our position i would start to get long here 12.75 not only is view op you know we're at view up here but it's also at an important level 75 i love 75s 50s and evens so those are key levels and then look if you're going to get long on vue up i'm actually going to hold it you know all the way to days low that's how much i really like ford today so i'm going to give it a shot to bounce around here on view op once you get this move down you say oh i'm in trouble i'm going to average in so i've only taken maybe a third or 50 of my trade down here you're waiting for it to go lower but surprise it doesn't go lower this break back to the upside here this break of view up at 75 again it's actually 73 this is where you green light the trade and you can put on your full position because not only did you test view up but it proved that we held something so we held the bottom then you get the break and that's the confirmation ride all the way to the top so right there you get a viewer break a hold and then a break back to the upside to me on 40 you're up seven percent when this happened you're up two or three percent so we want to be long we want to hold our longs and hold it with confidence then you get the break of the already day high and then you're off to the races so use volume weighted average price as an indicator to know when to get in on pullbacks and then if the pullbacks already happen and you're not in use it as a break to go long again so this is a good example on just a one minute chart using vwop on a strong name that you want to belong in that's ford so understanding the directional movement of a stock based on whether it's trading above or below v wap is a simple concept to understand uh but we can also add you know another level to that in that how far is it trading away from v wap and in that picture on that chart that shawn just showed you you saw it gets extended and extended and extended so that gives you even more incentive to understand that this is a very strong instrument regardless of whatever the instrument is i want to talk about the big guys let's talk about financial institutional sides money and the way that they use v-wap guys because it's important to understand that there are people who are basing their positions maybe longer term positions off of where a stock or any instrument for that matter is trading throughout the day this is a very very important one they're actually uh you don't call them order filling but when you talk about um you know the big institutions when they're tasked to start buying a position this could be a mutual fund whatever it might be a family shop you know they're looking to get the best possible execution while buying a stock and not affecting the price as much as they can and one of the metrics that will be used is uh can they beat the volume weighted average price let's imagine you have to buy a million shares of virgin galactic uh they're trying to get in a price that's going to be better than the volume weighted average price by the end of the day you ask yourself well how would that look and how is that going to actually happen well if you were trying to do that you would be every time in the red line here's v wap i'm going to get to what that blue line is in a quick second just as a bit of a contrast but you know this red line here is v off every time it travels below you'd look to be a buyer these institutions would look to be buyers and then when it goes above well they don't want to buy as much above that because their average pricing gets worse and worse with reference to the volume weighted average price now i said there was a blue line on this chart the red this nice smooth one going up here and sort of steadying along is going to be your volume weighted average price the blue is is a simple moving average and just to contrast the two you'll see a moving average is constantly going to be adjusting it's basically it's a nine minute so it's gonna did this on purpose so that it would hug essentially what the price action will be as far as being an indicator or not for an obvious trend or getting an idea how you can use it against institutional orders it's not of any use breaks of this is going to trigger multiple trades over and over again you'll be scalping in and out for 100 times a day if you use something like that however identifying that simple fact that if you are bullish on virgin galactic the socket gapped up and you're looking for places to buy it let's highlight what the institutions might be thinking based on that theory that they are going to be buying more as it gets below the average price and reluctant to buy it above that price how do you take that to your advantage when it gets above you'll see it actually a couple of times dislocate away by call it like 50 or 60 cents then again by about 40 or 50 50 cents when it gets below this price and then starts to drag below barely gets that 30 pennies the next time it actually gets even less than that by about 20 or 23 cents so you can see as virgin galactic got below that volume weighted average price you could infer that there was more aggressive buying earlier on not waiting for it to dislocate as far away on the top end meaning there could have been some eager buyers how do you use that information when it breaks back above you sort of identify that is institutions could be bullish i want reasons to go long now do you go long on a v op break as sean would have showed you absolutely that's going to work i mean that's going to be a better entry than what i'm going to show you but they all work out here so the next thing that happens is you look towards the left next the last time it tests back towards view op can it get there can it break through can it balance it does not so you get this hold at 50 you break the high of the day and then you take a breakout long trade whether or not you're buying in front of ewop as sean would do and get a perfect price or you simply allow it to bounce away from view up no longer testing and then giving people that opportunity to buy lower suddenly you're chasing prices if you want to be long in virgin galactic because it's not even giving you the chance to accumulate that long through the breakout is another way you can take advantage here so you identify that the buying started earlier below v-wop than the selling was away from it to the top end and then you're aggressive with your longs once it gets back above all right so a lot to digest there but if we understand the simple fact that you know institutional money is going to use v-wop as a bit of a benchmark so they're going to base their average price in a position off of where that instrument is trading versus v wap and as neil mentioned they're trying always to get a slightly better price than where v wap is shawn has a great example of something that uh happened in ford recently that is sean i think a perfect example to show here yeah it is and it's actually look i've known neil for almost 30 years here and i just learned something from him dislocate away from the price and that's exactly a perfect terminology so thank you neil for that one and it's actually happening as we speak i have no idea if this is what's going to happen but if you look at ford here i brought this out for a 10 minute chart just to show you still with v wap on here look at how far ford gets remember we're talking about the big institutions and what they're trying to do is move money around right they want to capture spread they want to capture profits for their investors and not let things you know they don't want to answer questions hey when ford was all the way up here at 13 and we're long at 11 why did we not start selling some because this could crash back down so what they try to do is notice how far this has extended away and then start to try to close this gap because they know that if they're the sellers up here they're getting the best prices so if they start pushing this back down a little bit retail clients and whatnot will join and then they actually get the price to come back in and they're the winners because they've sold near the top the example is perfect i think ford historically we're just going to go back a couple days here about about a week you know almost seven or eight days here you could see this is 11.50 so this is where vue up is current price at that time 11.38 so that's let's call that whatever 15 pennies to the downside there same thing here another 15 pennies we basically don't get away this is 1201 when the price is trading at 12 15. that's another 15 pennies i'm trying to find areas where basically the 15 pennies gets broken so here you have 12 30 and this is 12.49 that's 20 pennies so look what happens they bring ford back up to get closer to close that gap and i just think right now if i'm going to look back at ford and we could double check this in the next couple days but i believe ford probably pulls back in and remember this is a 10-minute chart so over the next you know couple hours we may pull back in here as we try as the big guys the institutions mutual funds hedge funds algorithms everything like that try to pull ford back into vwop so every single time we had some dislocation we actually pulled back into view op so i expect that here right now 1306 is where we're at price 1340 brendon so that's 40 cents there we're way out of whack understand that uh it's going to draw a lot of attention regardless of uh what you're looking at as far as a trading strategy volume weighted average price is going to have a lot of eyeballs on it when price moves through it either direction so a lot of key information in that video guys on viwa hope you enjoyed that one here's valeria hey guys thank you for this great information dear viewers please subscribe to this channel to see more great videos [Music] you