Learn Trading Under The Guidance of Vivek Bajaj + 4 Mentors - Know More

Stock से EXIT करने का एक सरल तरीका।

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In this 22nd episode of the Learn2Trade series, Mr. Vivek Bajaj will demonstrate how to use the Volume Weighted Average Price (VWAP), a potential time-based indicator, to formulate an exit strategy while trading in the market. VWAP indicator can help you plan your exit strategy in stock. He will first explain the meaning of VWAP and its calculations, followed by an explanation of VWAP's trading strategy to identify market trends. He will also go over how to use it to exit a stock using TradingView later on. Finally, he will go over the concept of Anchored VWAP and how it differs from standard VWAP. In addition, he will also explain how to use anchored VWAP as a trading strategy.

Watch this video to learn everything about VWAP.

What You Will Learn

In the previous sessions, we discussed volatility and introduced two indicators: Bollinger Bands and ATR (Average True Range). In this video, he will discuss another important concept, VWAP or volume-weighted average price. He explains that VWAP represents the average price of shares traded, with the weight assigned based on the volume.

In order to create a line by linking each day's VWAP, he shows how to add VWAP to a chart. To show how the price moves in conjunction with VWAP, he converts the chart to a line chart. He highlights the importance of knowing the link between price and VWAP while developing trading strategies.

The session discusses how to use VWAP for intraday trading. For intraday sessions, he suggests using the daily VWAP and comparing it with the daily supertrend indicator. He says that a sell signal is indicated if a company is trading below its daily VWAP and the supertrend is negative.

He suggests using weekly VWAP as a take-profit strategy for swing trading. A stock may present a selling opportunity if it drops below its weekly VWAP. He uses the March 2020 market crash as an example to emphasize the need to have an exit strategy, particularly during market downturns.

Annapurna expresses fear about re-entering at a higher price after selling, to which Bajaj says that exit plans are essential. Even if the market bounces back after a decline, he emphasizes that timing your exits well can limit losses and enable re-entry at a premium, taking impact costs into account.

He introduces the concept of anchored VWAP, a time-based indicator that allows the user to choose particular anchor points for VWAP calculations as the session comes to a close. He advises saving the anchored VWAP concept for future use.

In conclusion, the course discusses the practical implications of VWAP in trading, with a focus on both intraday and swing trading situations. Bajaj emphasizes how crucial it is to comprehend how price and VWAP relate to one another, create exit plans, and gradually introduce more complex concepts, such as anchored VWAP into trading models.

Frequently Asked Questions (FAQs)

Q1. What is VWAP, how is it calculated and how can it be used for trading?

Volume Weighted Average Price is referred to as VWAP. It is computed by taking the volume multiplied by the price of shares traded and dividing the result by the total volume. It can be used to create trading strategies and identify market trends. Daily VWAP can be used with indicators such as supertrends for intraday trading. Weekly VWAP can be used as a take-profit strategy for swing trading.

Q2. How is VWAP different from anchored VWAP?

VWAP uses daily activity to determine average price; anchored VWAP gives users the option to select particular anchor points for VWAP calculations, resulting in a personalized analysis based on selected historical dates.

Q3. What is impact cost, and why should it be considered in re-entering a trade?

Impact cost refers to the additional cost incurred when re-entering a trade after selling. It represents the price difference between the decision to trade and the actual execution. Traders should consider impact cost because re-entering a trade at a higher price may be necessary, especially after selling during market fluctuations. While it increases the buying cost, factoring in impact cost is crucial to re-enter the market and mitigate potential losses strategically.

About Mr. Vivek Bajaj

Vivek bajaj image

The passion for data, analytics and technology is what makes Vivek Bajaj a financial market survivor. The journey as a market participant started in 2002 when the first trade was executed in the options contract of ITC. Life was simpler and easier during that time. Since then technology and Big data have taken over totally. As an early adapter to the complex tools, Kredent was formed to capitalise on the opportunities. He is co-founder of StockEdge and is committed to bring simplicity in the complex world of market data. He is a Chartered Accountant, Company Secretary and an MBA from IIM Indore. He is a part of various committees of exchanges and regulator and he has been an active contributor in the evolution of Indian Derivatives Market.

Learn2Trade Series: Episode 22

In this 22nd episode of the Learn2Trade series, Mr. Vivek Bajaj will demonstrate how to use the Volume Weighted Average Price (VWAP), a potential time-based indicator, to formulate an exit strategy while trading in the market. VWAP indicator can help you plan your exit strategy in stock. He will first explain the meaning of VWAP and its calculations, followed by an explanation of VWAP's trading strategy to identify market trends. He will also go over how to use it to exit a stock using TradingView later on. Finally, he will go over the concept of Anchored VWAP and how it differs from standard VWAP. In addition, he will also explain how to use anchored VWAP as a trading strategy.

Watch this video to learn everything about VWAP.

What You Will Learn

In the previous sessions, we discussed volatility and introduced two indicators: Bollinger Bands and ATR (Average True Range). In this video, he will discuss another important concept, VWAP or volume-weighted average price. He explains that VWAP represents the average price of shares traded, with the weight assigned based on the volume.

In order to create a line by linking each day's VWAP, he shows how to add VWAP to a chart. To show how the price moves in conjunction with VWAP, he converts the chart to a line chart. He highlights the importance of knowing the link between price and VWAP while developing trading strategies.

The session discusses how to use VWAP for intraday trading. For intraday sessions, he suggests using the daily VWAP and comparing it with the daily supertrend indicator. He says that a sell signal is indicated if a company is trading below its daily VWAP and the supertrend is negative.

He suggests using weekly VWAP as a take-profit strategy for swing trading. A stock may present a selling opportunity if it drops below its weekly VWAP. He uses the March 2020 market crash as an example to emphasize the need to have an exit strategy, particularly during market downturns.

Annapurna expresses fear about re-entering at a higher price after selling, to which Bajaj says that exit plans are essential. Even if the market bounces back after a decline, he emphasizes that timing your exits well can limit losses and enable re-entry at a premium, taking impact costs into account.

He introduces the concept of anchored VWAP, a time-based indicator that allows the user to choose particular anchor points for VWAP calculations as the session comes to a close. He advises saving the anchored VWAP concept for future use.

In conclusion, the course discusses the practical implications of VWAP in trading, with a focus on both intraday and swing trading situations. Bajaj emphasizes how crucial it is to comprehend how price and VWAP relate to one another, create exit plans, and gradually introduce more complex concepts, such as anchored VWAP into trading models.

Frequently Asked Questions (FAQs)

Q1. What is VWAP, how is it calculated and how can it be used for trading?

Volume Weighted Average Price is referred to as VWAP. It is computed by taking the volume multiplied by the price of shares traded and dividing the result by the total volume. It can be used to create trading strategies and identify market trends. Daily VWAP can be used with indicators such as supertrends for intraday trading. Weekly VWAP can be used as a take-profit strategy for swing trading.

Q2. How is VWAP different from anchored VWAP?

VWAP uses daily activity to determine average price; anchored VWAP gives users the option to select particular anchor points for VWAP calculations, resulting in a personalized analysis based on selected historical dates.

Q3. What is impact cost, and why should it be considered in re-entering a trade?

Impact cost refers to the additional cost incurred when re-entering a trade after selling. It represents the price difference between the decision to trade and the actual execution. Traders should consider impact cost because re-entering a trade at a higher price may be necessary, especially after selling during market fluctuations. While it increases the buying cost, factoring in impact cost is crucial to re-enter the market and mitigate potential losses strategically.

About Mr. Vivek Bajaj

Vivek bajaj image

The passion for data, analytics and technology is what makes Vivek Bajaj a financial market survivor. The journey as a market participant started in 2002 when the first trade was executed in the options contract of ITC. Life was simpler and easier during that time. Since then technology and Big data have taken over totally. As an early adapter to the complex tools, Kredent was formed to capitalise on the opportunities. He is co-founder of StockEdge and is committed to bring simplicity in the complex world of market data. He is a Chartered Accountant, Company Secretary and an MBA from IIM Indore. He is a part of various committees of exchanges and regulator and he has been an active contributor in the evolution of Indian Derivatives Market.

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Other series by Elearnmarkets

Watch Mr. Vivek Bajaj introduce the basic concepts of trading and discuss the various stock market indicators.

Explore Series