Saturday, March 14, 2009

VWAP re-visited

Review of Friday's trade....

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I was stopped out @753, gain of 2.75, but what hurts is that I left an additional 7 frickin' points on the table.

As usual, the timing of my entry was not the problem. The main issue was that i did not manage the trade properly.
There were two warning signs to exit the trade earlier:

1. Price could not break below overnight lows despite a downtrending VWAP
2. A series of higher lows and declining VWAP.
3. Time Stop - New lows made in the 10min frame prior to 644AM, but no new lows in any 10min. time frame after 644AM.

In terms of mistakes, I also failed to pay attention to TICK and ADD, two indicators that I usually use when trading ES. I was pretty close to the 10pts that I wanted to get out of the trade, and should have not been that greedy. Hopefully writing about this will internalize this lesson.

Anyways, once I started reviewing this trade, I also noticed that ES oscillated above and below VWAP, which as Dr.Brett has noted, is a good indicator of a range day. The earlier that I can recognize a range day, the earlier I can adjust my tactic to fade moves away from VWAP.

Looking back at my prior posts in the context of Dr.Brett's VWAP post, it looks like VWAP can help me to determine the market type for that session. This has given me some new ideas to try out for the coming week.

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