Day Four: VWAP and EMA Trading Strategies

Key Concepts

• VWAP (Volume Weighted Average Price)

  • An indicator showing the average price of a stock adjusted by volume.
  • Useful for low-risk, high-reward trading and intraday pivots.
  • VWAP is analogous to the average price level of all traders for that day.

• EMA (Exponential Moving Average)

  • Focuses on the weighting of the most recent data points.
  • Used for day trading to react more to current price changes.

VWAP Trading Strategies

Bullish VWAP Bounce

• Occurs when stock is above VWAP and pre-market high.
• Look for a dip to VWAP with rising buying volume.
• Enter calls when the stock shows green at VWAP.
• Example: Entry at VWAP dip, confirmed by pre-market high.

Bearish VWAP Reject

• Occurs when the stock is below VWAP and pre-market low.
• Look for bounces to VWAP and buy puts if wicks appear.
• Example: Entry on VWAP retest, confirmed by wicks.

Important Rules

• Never buy puts when stock is over VWAP.
• Never buy calls when stock is under VWAP.
• Bullish retests work when stock is over pre-market high.
• Bearish retests work when stock is under pre-market low.

EMA Trading Strategies

Using the 9 EMA

• The 9 EMA is crucial for precise entry points in conjunction with VWAP.

• Bullish EMA Strategy

  • Buy calls if stock is above both VWAP and 9 EMA.
  • Ride the trend, stop out when below 9 EMA.

• Bearish EMA Strategy

  • Buy puts if stock is below both VWAP and 9 EMA.
  • Look for price to test the 9 EMA and continue downwards.

Avoiding Chop (Gucci Snake)

• Avoid trading when VWAP and EMA lines are crisscrossing.
• No clear trend indicates higher risk of loss.

EMA Settings

• Set the length to 9 for the 9 EMA.
• Make sure visibility is across all time frames.
• Remove unnecessary bands from VWAP settings.

Additional Notes

• Trend is key: Buy calls when stock is above indicators, buy puts when below.
• Do not trade in chop; it leads to potential losses.
• Focus on 'Big Trend Days' for the best opportunities.
• Acknowledge the importance of pre-market high/low for confirming trends.

Next Steps

• Upcoming session on entries, exits, and risk management.
• Importance of systematic trading over gambling-like approaches.
• Encouragement for engagement and learning through additional resources and channels.