Underlying VWAP
For all who swear by and trade using VWAP, this is a modification of the same.
The current settings are set for
BANKNIFTY
, however this can easily be changed for
NIFTY
*** How is this indicator different ? ***
This indicator color codes the VWAP on
BANKNIFTY
basis the price movement of top 6
BANKNIFTY
constituents with respect to their respective VWAPs.
It uses the weights of individual underlying stocks to calculate a relative strength of
BANKNIFTY
's price movement w.r.t. its VWAP.
A threshold value of 80% is set as to define if the movement is strong or not.
If the up move is strong, it is plotted as Dark Green color on VWAP.
If the down move is strong, it is plotted as Dark Red color on VWAP.
Otherwise, VWAP is white in color.
*** How to Trade using this Indicator? ***
-Buy when the VWAP is dark green. This indicates that majority of the constituents are trading above VWAP by half ATR. A change from RED or WHITE to DARK GREEN color of VWAP is go ahead to initiate a long position.
-Sell when the VWAP is dark Red. This indicates that majority of the constituents are trading below their VWAP by half ATR. A change from Green or WHITE to DARK RED color of VWAP is go ahead to initiate a Short position.
-When VWAP is white, I would recommend not to initiate any positions, at least on options side as it indicates either a range bound price movement or lack of momentum.
- If one is already in a position, Long or short, do not exit if a white VWAP appears. Having said that, other indicator based exit signals or price action based exit signals can be used to exit the position. But using this indicator only, one should exit when VWAP turns RED.
The current settings are set for
BANKNIFTY
, however this can easily be changed for
NIFTY
*** How is this indicator different ? ***
This indicator color codes the VWAP on
BANKNIFTY
basis the price movement of top 6
BANKNIFTY
constituents with respect to their respective VWAPs. It uses the weights of individual underlying stocks to calculate a relative strength of
BANKNIFTY
's price movement w.r.t. its VWAP. A threshold value of 80% is set as to define if the movement is strong or not.
If the up move is strong, it is plotted as Dark Green color on VWAP.
If the down move is strong, it is plotted as Dark Red color on VWAP.
Otherwise, VWAP is white in color.
*** How to Trade using this Indicator? ***
-Buy when the VWAP is dark green. This indicates that majority of the constituents are trading above VWAP by half ATR. A change from RED or WHITE to DARK GREEN color of VWAP is go ahead to initiate a long position.
-Sell when the VWAP is dark Red. This indicates that majority of the constituents are trading below their VWAP by half ATR. A change from Green or WHITE to DARK RED color of VWAP is go ahead to initiate a Short position.
-When VWAP is white, I would recommend not to initiate any positions, at least on options side as it indicates either a range bound price movement or lack of momentum.
- If one is already in a position, Long or short, do not exit if a white VWAP appears. Having said that, other indicator based exit signals or price action based exit signals can be used to exit the position. But using this indicator only, one should exit when VWAP turns RED.
הערות שחרור:
This is the improved version of the Underlying_VWAP indicator published a few days back. The improved version incorporates the weights of top 6 constituents of Nifty using which it color codes the VWAP.
The logic remains the same, i.e. a dark green color indicates the 80% of the cumulative weights of underlying stocks are trading above their respective VWAP such that we can have more confidence that if price of
NIFTY
or
BANKNIFTY
has higher potential to follow that trend.
Similar logic remains applies to Red color of the VWAP but on the downside.
For non
NIFTY
and
BANKNIFTY
charts the VWAP will be WHITE
The logic remains the same, i.e. a dark green color indicates the 80% of the cumulative weights of underlying stocks are trading above their respective VWAP such that we can have more confidence that if price of
NIFTY
or
BANKNIFTY
has higher potential to follow that trend. Similar logic remains applies to Red color of the VWAP but on the downside.
For non
NIFTY
and
BANKNIFTY
charts the VWAP will be WHITE
הערות שחרור:
Republishing this as last publish I updated the chart to 1 hour time frame. Now i have changed this to 5 min time frame as this is most popularly used time frame and You can see the effectiveness off this Indicator more clearly. Having said that, this indicator can be used on any time frame.