VWAP STRATEGY

 TYPE OF STRATEGY – INTRADAY

 INDICATOR USED – VWAP (volume weighted average price)
 TIME FRAME – 15 MINUTES
 APPLICABILITY – ALL INSTRUMENTS

TERMS USED : PVWAP and CVWAP

 Pvwap is previous day end of the day vwap value. It can be obtained by
plotting vwap indicator on chart and marking where it was placed at 3:15
pm on the previous day

 Cvwap is current day vwap. It can be obtained by plotting vwap indicator. It

changes as and when price changes

GIST OF THE STRATEGY

 If an instrument is trading above pvwap, it is bullish and we look for a buy

entry

 If an instrument is trading below pvwap, it is bearish and we look for a sell

entry
ENTRY POINTS
 BUY ENTRY - latest 15 minute candle that crosses cvwap and closes above
both cvwap and pvwap, buy entry will be above high of that candle. The
candle that crosses and closes above both cvwap and pvwap is called
“confirmation candle”, candle which crosses its high is called “trigger
candle/entry candle”

 SELL ENTRY - latest 15 minute candle that crosses cvwap and closes below
both pvwap and cvwap, sell entry will be below low of that candle

EXIT POINTS
 TARGET :
o NF - 30-35 points
o BNF - 90-120 points
o Crude - 30-50 points
o Others - 1-1.2% from entry level

 STOP LOSS :
o NF - 25 points
o BNF - 60 points
o Crude - 20 points
o Others - 1% from entry level
FAQs

1. What is VWAP indicator? How to plot it?

Vwap is an intraday indicator which works best on 15 minutes. This

indicator is available on all major trading/charting platforms. Simply go to
“Studies/Indicators” section and select “vwap”

2. How to avoid fake breakout?

Fake breakout cannot be totally avoided. However, those who want to cut
down on the risk of fake breakout, can avoid taking trades on first vwap.
They can take a vwap pullback trade which I have mentioned in point no.3
under “Tricks and Tips” section

3. Vwap Strategy hitting SL during range-bound days

Agreed that strategy works less on range bound days but whether a day is
range bound or not that we get to know only during the day. No way to
identify beforehand if a day will be range bound. One can only predict.
However, one can avoid taking trades the day after a trending day,
assuming it is usually a range bound day

4. What is the success ratio of this strategy?

In past, this strategy has given more than 60% results and with 1:1 Risk
reward ratio, it is excellent. You can do your math.
5. On what instruments does this strategy work?

This strategy works on all instruments, i.e., all stocks, indexes, commodities,
currencies, etc. However, it works best on high beta stocks, Nifty Future,
Bank Nifty Future and Crude.

6. What is the meaning of high beta stocks?

High beta stocks are fast moving stocks. Stocks that move equally or faster
than the movement of index are called high beta stocks. Their beta is
usually equal to or greater than 1.

Few examples are : Axis Bank, Adani Ent, DLF, Rel Infra, Tata Steel, Tata
Motor, Idea, SBI, Canara Bank, IBHF, Just Dial, LTHF, Jubilant Food,
Hindalco, Bajaj Finance, Reliance, etc.

7. Can any other indicator be used along with vwap indicator?

Vwap indicator takes into consideration volume, time and price. Hence, no
other indicator is required. We don't use any other indicator except vwap.
If you want to use, you can use on your own discretion and comfort.

8. Whether to take all the trades generated as per vwap?

It purely depends on your risk appetite. Probability of target or SL being hit

doesn’t change. We take all trades that are generated.
9. Can a lower time frame be used?

There is no strict rule against using a lower time frame. if you are
comfortable, you can try on a lower time frame like 5 minutes or 3 minutes
as well. Strategy says 15 minutes so if you deviate, do your back-testing and
then deviate.

10.How many lots should I trade in while using this strategy?

It is ideal to risk 1-2% capital in your trade. So if your capital is say 1 lac,
max risk should be 2,000. Hence you can trade in one lot of NF (25*75=
1,875)

11.Can we trade in options using vwap strategy?

We don’t trade in options, but if you’re very keen to do so you can trade in
‘In The Money” options using chart of the instrument for entry and exit. We
don’t recommend applying this strategy to options chart.

12.Volatile Days

To all traders who haven’t traded for at least 2-3 years extensively, we
suggest to not trade NF and BNF on days when there is RBI meet or any
other like PM/FM speech as volatility is pretty high on those days and
probability of your trade hitting stop loss is high. Same way, we
recommend not to trade Crude on Wednesdays/Inventory Days as around 8
pm when inventory is announced the price becomes too violent.
TIPS AND TRICKS
PLEASE NOTE :- ONLY THOSE WHO HAVE BEEN USING VWAP STRATEGY
REGULARLY AND RELIGIOUSLY WILL UNDERSTAND THIS SECTION. IF YOU ARE A
COMPLETELY NEW USER, YOU MAY SKIP THIS SECTION ENTIRELY AND COME BACK
WHEN YOU GET A HOLD OF THE STRATEGY

1. As per strategy, for buy entry to be generated, bullish confirmation candle

is required and for sell entry to be generated, bearish confirmation candle
is required. However, we have amended it a bit. We do not consider the
colour of the candle. If all other conditions satisfy, we enter the trade.
(Refer chart no. 5)

2. As per the strategy, confirmation candle has to touch cvwap and close
above/below for entry. However, if previously during the day any candle
has touched cvwap and closed above/below it and later on the trigger
candle doesn’t touch cvwap, we still enter the trade. (Refer chart no. 4)

3. Those who fear trading a false breakout can avoid trading on first break out
and wait for a pullback. We call this vwap kiss. Conditions for vwap kiss –
a. First vwap breakout should have happened
b. Pullback towards cvwap takes place wherein a candle retraces
towards cvwap, touches it but doesn’t close beyond it. (if first buy
has been generated, candle should not close below cvwap and if first
sell has been generated, candle should not close above cvwap)
c. Entry and exit will be same as per vwap strategy
d. Only difference is that it is pullback trade not a breakout trade which
gives more confirmation of price going in direction of trade

(Refer chart no. 5,6 and 7)

CHARTS
1. BNF CHART DEPICTING BUY ENTRY AND TARGET ACHIEVED

2. TATA MOTORS CHART DEPICTING BUY ENTRY AND TARGET ACHIEVED

3. NF CHART DEPICTING SELL ENTRY GENERATED AND SL HIT

4. NF CHART DEPICTING SELL ENTRY AND TARGET ACHIEVED (REFER TRICK NO. 2)
5. CRUDE CHART DEPICTING BUY ENTRY AS PER VWAP KISS AND TARGET ACHIEVED
(REFER TRICK NO. 1 AND 3)

6. NF CHART DEPICTING BUY ENTRY AS PER VWAP AND TARGET ACHIEVED

7. BNF CHART DEPICTING SELL ENTRY AS PER VWAP KISS AND TARGET ACHIEVED
IMPORTANT LINKS :
 Video Link of the strategy: https://youtu.be/erA_wAjUh0k

 For more trades, checkout the compilation: https://drive.google.com/file/d/18X-

5ZEV3N-tqzzoIqRIPKKtV3gAK_cRK/view

 For information on how to trade Gap up and Gap down usinf vwap, read :
https://drive.google.com/file/d/1bjGwir6BAaUVyKwWiHE0nszkLX5mPzzD/view?us
p=sharing

CHARTS AND DATA INPUT BY :

 @sanstocktrader
 @CAtLarge
 @ankurm84
 @blisstrades

THE END