- This is a highly requested video from you guys
about my favorite indicator to trade with.
Many of you commented VWAP in my previous video.
So I decided to give away three golden tips
for my VWAP indicator trading strategy.
As long as you remember to smash the like button
and subscribe to the channel, I'll be showing you today
how to use VWAP as key level in today.
How to maximize your profit with VWAP
and last but not least, how to use VWAP
to spot short traps consolidations.
VWAP is a very powerful indicator.
It stands for volume-weighted average price.
It's very powerful for traders
because it takes in both price and volume into calculations.
It's not like the moving averages like EMAs and SMAs
where the formulas only average out the price.
Most of you guys probably know by now
I like to keep my charts very clean.
All the indicators I use on my charts
are this blue line here, which you can see.
This is the VWAP over here.
I use VWAP and volume and that's all I use.
So just a quick overview here.
If a stock is trading above VWAP
so you can see the stock, APE, AMC preferred equity.
If a stock is trading a holding above this blue VWAP line,
then the stock is perceived as bullish.
That's due for a bounce.
Now on the other hand, if it's staying below VWAP
like the day IP old, you can see the stock broke down
VWAP, that blue line and stayed below it all day long.
Then that's perceived as very weak.
In the most general sense, you want a short stocks
it's below VWAP and long stocks it's holding above VWAP.
So the first tip I have for you
is using VWAP as intra day key support.
Now looking at the stock here INDO.
This is a small cap stock on screen here,
very low flow stock it's a former runner.
Previously on a data you can see it ran multiple times
in the past before.
Over here, this day it went from $9
all the way to 70 and $80.
So this baby can go.
Now on this day the stock actually gaped up
with the rest of the energy stocks.
Now when the stock broke above the $9 area
which you can see here on the daily charts,
then this is what we call a daily breakout.
So you can see the stock broke out above it
right at the open.
Broke out from $9 to 950, and where did it pull back to?
It pulled back to VWAP.
You can see it pulled back a little bit to 917s,
may try to attend another new highs 980s
and each time it pulls back
it's holding well above this VWAP indicators.
You can see total 930s and slowly consolidated
making higher lows.
You can see a bounce out VWAP
create another new higher low here,
960 and that's when you broke out.
Squeeze through the higher day and into the 11th.
So this is one of the best ways to use VWAP indicators.
First of all, you wanna make sure
you have a daily breakout on the chart.
And this applies for both small cap and large cap stocks.
And especially early in the morning
if you see the stock is breaking out
but pulling back just around VWAP, holding higher lows,
then a lot of times that's a great entry on the long side
and you can ride it to the moon.
Okay, not to the moon, but to $11 on next leg breakout
you can see a pullback once again
this time around it held well above VWAP
and made another breakout move to the upside to $12.
Like we just said, it works just as well
for large cap stocks, if not even better.
Now we're looking at OXY, another energy stock.
This stock was extremely strong out of the gate.
Same idea here.
You can see it broke out right above yesterday's highs
of $71 right at the open.
Look at the volume down here, extremely strong.
So we have a daily breakout with strong entry day volume
and you can see the stock held well above VWAP
for each of these five minute candles.
This is how you know the stock is,
this is a strong breakout.
And you can use any dips towards the VWAP area
as your long entries.
Now, if you more short biased, which you guys know
sometimes I am for the small cap stocks,
this is not a chart you wanna short.
I saw this thing this morning.
I did trade it on the long side,
and I did tell everyone, Hey, don't short this
especially when it's a large cap stock
you can see every single dip to worth VWAP.
It's getting bought back up.
Every single attempt to break down towards VWAP,
it's getting bought back up.
That just tells you how strong the stock is.
So if you are short bias, you don't wanna show this thing.
Now this brings us to tip number two,
using VWAP to maximize our profit
especially when the stock is breaking down.
You guys know that I love shorting meme stocks.
Whether it's BBBY, or AMC in the past before.
And the reason I love it is because once the stock,
as you can see breaks down VWAP, it stays extremely heavy.
And a lot of times they fade all the way into the close.
So looking at the stock here, BBBY.
It's a meme stock that's been getting a lot of attention
in the last couple weeks.
You can see this stock, this red date down here.
The stock I sold off from all the way $26 down to 18
and now gaping down to around $10.
Now on this day, I actually traded first
on the long side for the stock.
I loaned the stock from $10 and sold into 11 and twelves.
And once I see the stock staying heavy
and breaking down red to green area and went red on the day
and then now it tried to bounce out VWAP.
You can see earlier we talked about when you have a breakout
that VWAP should be your bounce area.
But this stock it was extremely weak.
You can see it tried, it barely bounced above the VWAP.
It bounced maybe like 30 cents from 1030 to 1060
and you just cannot hold above it.
So once it's broken down VWAP, that's my sign that, Hey
if I was long I need to cut it now, because I know that
once the stock, a stock like this, it breaks down VWAP,
it's likely to fade all day and staying below it.
So that's exactly what happened.
On this five minute chart BBBY,
you can see, once I bailed on my long side
it dumped below VWAP from 1030s all the way down to 980s.
It attempted to bounce one time.
That VWAP now acts as resistance.
You can see it try to test that blue area here, 1030s
but it's unable to even like retest and reclaim that area.
So that's how you know the stock is extremely weak.
So you can see that's how the stock
rejected that VOP area multiple times
and continue to down trend all day.
It's the same idea the next day as well.
I mean, if you look at next day, which is this morning
had a small gap up overnight,
try to break out with the rest of the market.
You can see a lot of weaks
around the top end of the candle stick.
And if you learn anything from our price action
trading video, all the weaks on the top end of the candle,
especially around resistance,
that means the stock is getting sold into.
That means it's weakness for the stock.
So these meme stocks, AMC, BBBY,
and now I'm sure APE they'll trade very similarly.
Once they break down VWAP they fade all day.
So if I was short biased, to maximize my profit
I would try to ride it out for the entire day
on the short side.
And in fact, I've actually swung short AMC multiple times
for multiple days.
The next tip we're gonna talk about is using VWAP
to spot short trap consolidations.
This is something we've seen many times
especially with the low float runners,
the meme stock runners.
A lot of times, this is exactly
what led to the huge breakout.
So that's why it's very important to understand
what short traps are and how to use them to your advantage.
But before we go there, make sure to trap the like button,
just like how my ex-boyfriend almost trapped me.
- What?
- But don't worry I escaped.
So things are all good.
But remember to smash the like button.
So speaking of short traps,
I do think VWAP is the best indicator to use
for spotting this kind of price action.
So looking at APE now, AMC preferred shares today
especially when it started breaking down VWAP
that's why I started getting in short.
So I was short the stock.
I did cover some around 660s but I did think that,
Hey, since staying below VWAP like we talked about,
it looks like it's gonna fade all day.
Just like the BBBY and AMZ example we talked about.
However, if you go to a two minute chart now on APE,
you can see no, yes it dropped all the way down to 650s,
bounce back to 690 and slowly faded down lower.
Now, a lot of times when you see this
you see the stock holding a double bottom.
That's what these, meme stocks are usually
how they trap you.
They have a small, false breakdown from 654 down to 649.
Take out some stops, take out some weekends
from the retails.
And then that's when slowly reclaim back to VWAP.
So a lot of times they go straight
back on really low volume.
So you can see it went from 650 up to VWAP, 690s.
I had to stop around like $7 area,
I didn't get stop out.
I was thinking, okay, it might be a fake out,
you know that VWAP could act as resistance
like we talked about earlier.
But no, this thing actually break down a little bit
and held a higher low.
So what higher low looks like is this low right here,
if we kind just draw a line here.
This low area is higher than the previous low,
the double bottom.
So if you go to the five minute draw trend line,
this is tech, this low the higher lows is forming
below VWAP, it's lower than the one before.
So a lot of times this is how you spot short traps.
When you start seeing that on the higher timeframe
it's creating these higher lows
and reversing the trend after the stock at double bottom.
But a lot of times the VWAP reclaim is a tell-tale sign.
When you start doing higher lows below VWAP
and breaks through it, that's when I got stocked out.
So I'll surely show the chart right here.
I had to stop right here around 702, 710s.
It was a good stop.
And you can see once a stock broke out above VWAP
and I stocked out, thank God,
you can see the squeeze through the higher day
to 740s, 750s.
if I was still stock short, I would've got it squeezed out.
So this is how you know it's a short trap.
They break it down to seem like it's really weak,
for an extended period of time, from 1050
all the way to, an hour, 1040, 11
and that's when it started breaking out.
Short traps like this usually stayed below VWAP
during the middle of the day.
So that's why around 11 o'clock, 12 o'clock,
that's like the prime time for short traps.
So this is a good example here.
And the stock actually held about VWAP
for the rest of the afternoon.
The VWAP around $7, seven to 10s area held really well.
So they wouldn't be surprised if it gives
another secondary breakout move the next day.
Now, back to the stock, INDO we used earlier as an example.
The low floater energy stock.
So we talked about the breakout earlier to 1250.
Now, a lot of times when you start to break down midday
looking like it's weak, like we talked about
breaking down below VWAP, these like low floaters,
they're really good at trapping more shorts.
I mean, it's a low float stock.
A lot of times it does attractive short sellers.
Me being one of them, not today though.
I saw the short trap I'm just like, no,
there's no way I'm shorting this.
So it breaks down VWAP and actually try to create
like a lower high making it look not very bearish,
looking like, okay
it's gonna form a lower high around here.
You can see, like if you are using technical analysis,
you'll think that, oh this thing is,
this the higher day, now it bounce around VWAP
to test the lower highs.
And now it looks like it's gonna be another lower high
and start breaking down.
But no, actually what it did is it held
the higher lows below VWAP.
So this is how they've trap you, if you are short bias.
You wanna be very careful because in the middle of the day
you can see coincidentally when they were trapping,
you can see down here, the volume is extremely low.
So once again, higher lows on five minutes
below VWAP around midday, lunch time on low volume,
that's when you wanna be very, very alert
if you are short biased.
Because otherwise you can get trapped once again.
Once this thing reclaimed over VWAP around 1:30,
that's when it broke out and went to test $12 again.
Hopefully you guys enjoy these three tips
for how I use the VWAP indicator.
To use as intra day key levels, to use it to maximize
my trade on the short side and to use it to spot
short trap consolidations, especially midday.
And if you enjoy the video, comment down below
and let me know, what's your favorite indicator
and how do you use it?
If you're interested in learning more
about price action trading,
then make sure to check out my other video over there.
I share a lot of more useful trading tips with you guys.
Also congratulations to winners
of the 900,000 subscribers giveaway.
I really appreciated all of you who commented
in the price action video.
For the winners, make sure to check for my replies
in your comment section.
Make sure it's a real reply from myself,
that'll have a highlight over my name, Humbled Trader.
Thank you so much for all of your support.
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Thank you guys so much for watching us always,
I'm the Humble Trader, and I'll see you guys next time.
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